-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DvW/j2PxZ1cAcT7LT9RiSxDzWGNoEKKUmXSK+U5AZdDxd1v7UgQLl3s2QmWk2Xcl dfrB+CmoWqkQjir8LpgqsA== 0001045969-97-000238.txt : 19971224 0001045969-97-000238.hdr.sgml : 19971224 ACCESSION NUMBER: 0001045969-97-000238 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19971129 FILED AS OF DATE: 19971223 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUPERVALU INC CENTRAL INDEX KEY: 0000095521 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & RELATED PRODUCTS [5140] IRS NUMBER: 410617000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0222 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05418 FILM NUMBER: 97743248 BUSINESS ADDRESS: STREET 1: 11840 VALLEY VIEW RD STREET 2: NULL CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 BUSINESS PHONE: 6128284000 MAIL ADDRESS: STREET 1: 11840 VALLEY VIEW ROAD CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 FORMER COMPANY: FORMER CONFORMED NAME: SUPER VALU STORES INC DATE OF NAME CHANGE: 19920703 10-Q 1 QUARTERLY REPORT FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period (12 weeks) ended November 29, 1997. [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ..................... to........................ Commission file number 1-5418 SUPERVALU INC. (Exact name of registrant as specified in its Charter) DELAWARE 41-0617000 - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 11840 VALLEY VIEW ROAD, EDEN PRAIRIE, MINNESOTA 55344 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (612) 828-4000 ---------------------------- Former name, former address and former fiscal year, if changed since last report: N/A - ------------------------------------------------------------------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------------------- ------------------ The number of shares outstanding of each of the issuer's classes of Common Stock as of December 8, 1997 is as follows: Title of Each Class Shares Outstanding ------------------- ------------------ Common Shares 60,106,000 PART I - FINANCIAL INFORMATION - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Item 1: Financial Statements - ------------------------------------------------------------------------------ CONSOLIDATED STATEMENTS OF EARNINGS - ------------------------------------------------------------------------------ SUPERVALU INC. and Subsidiaries - ------------------------------------------------------------------------------ (In thousands, except per share data)
Third Quarter (12 Weeks) Ended ---------------------------------------------------------------- November 29, 1997 % of sales November 30, 1996 % of sales - -------------------------------------------------------------------------------------------------------------- Net sales $ 4,004,565 100.00% $ 3,904,841 100.00% Costs and expenses: Cost of sales 3,600,773 89.92 3,519,631 90.14 Selling and administrative expenses 306,827 7.66 291,940 7.48 Amortization of goodwill 4,568 0.11 4,488 0.11 Interest Interest expense 29,859 0.75 32,523 0.83 Interest income 4,778 0.12 3,233 0.08 --------------------------------------------------------------- Interest expense, net 25,081 0.63 29,290 0.75 --------------------------------------------------------------- Total costs and expenses 3,937,249 98.32 3,845,349 98.48 --------------------------------------------------------------- Earnings before equity in earnings of ShopKo and income taxes 67,316 1.68 59,492 1.52 Equity in earnings of ShopKo - - 5,023 0.13 --------------------------------------------------------------- Earnings before income taxes 67,316 1.68 64,515 1.65 Provision for income taxes Current 25,939 22,624 Deferred 1,128 1,674 --------------------------------------------------------------- Income tax expense 27,067 0.67 24,298 0.62 --------------------------------------------------------------- Net earnings $ 40,249 1.01% $ 40,217 1.03% =============================================================== Net earnings per common share $ .67 $ .60 Weighted average number of common shares outstanding 60,211 67,110 Dividends declared per common share $ .260 $ .250 Supplemental information: After-tax LIFO (expense) $ (512) $ (3,300) All data subject to year-end audit. See notes to consolidated financial statements.
2 CONSOLIDATED STATEMENTS OF EARNINGS - ------------------------------------------------------------------------------ SUPERVALU INC. and Subsidiaries - ------------------------------------------------------------------------------ (In thousands, except per share data)
Year-to-date (40 Weeks) Ended ---------------------------------------------------------------- November 29, 1997 % of sales November 30, 1996 % of sales - -------------------------------------------------------------------------------------------------------------- Net sales $ 12,903,880 100.00% $ 12,662,347 100.00% Costs and expenses: Cost of sales 11,605,673 89.94 11,417,484 90.17 Selling and administrative expenses 990,778 7.67 948,000 7.48 Amortization of goodwill 15,162 0.12 14,272 0.11 Interest Interest expense 101,026 0.78 105,057 0.83 Interest income 13,808 0.10 11,861 0.09 ---------------------------------------------------------------- Interest expense, net 87,218 0.68 93,196 0.74 ---------------------------------------------------------------- Total costs and expenses 12,698,831 98.41 12,472,952 98.50 ---------------------------------------------------------------- Earnings before equity in earnings and gain on sale of ShopKo and income taxes 205,049 1.59 189,395 1.50 Equity in earnings and gain on sale of ShopKo 93,364 0.72 9,469 0.07 ---------------------------------------------------------------- Earnings before income taxes 298,413 2.31 198,864 1.57 Provision for income taxes Current 113,326 68,401 Deferred 5,957 8,400 ---------------------------------------------------------------- Income tax expense 119,283 0.92 76,801 0.61 ---------------------------------------------------------------- Net earnings $ 179,130 1.39% $ 122,063 0.96% ================================================================ Net earnings per common share $ 2.82 $ 1.81 Weighted average number of common shares outstanding 63,472 67,366 Dividends declared per common share $ .770 $ .745 Supplemental information: After-tax LIFO (expense) $ (2,057) $ (1,630) All data subject to year-end audit. See notes to consolidated financial statements.
3 CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------------------------- SUPERVALU INC. and Subsidiaries Third Quarter Fiscal Year End - ----------------------------------------------------------------------------------------------- (In thousands) November 29, February 22, ASSETS 1997 1997 - ----------------------------------------------------------------------------------------------- Current Assets Cash and cash equivalents $ 39,626 $ 6,539 Receivables, less allowance for losses of $14,589 at November 29, 1997 and $17,806 at February 22, 1997 443,551 403,835 Inventories 1,287,484 1,091,805 Other current assets 84,126 98,620 ---------------------------------- Total current assets 1,854,787 1,600,799 Long-term notes receivable 77,198 45,588 Long-term investment in direct financing leases 90,691 84,350 Property, plant and equipment Land 137,202 140,427 Buildings 923,364 957,815 Property under construction 48,085 28,030 Leasehold improvements 152,498 150,040 Equipment 1,130,641 1,113,486 Assets under capital leases 306,469 298,757 ---------------------------------- 2,698,259 2,688,555 Less accumulated depreciation and amortization Owned property, plant and equipment 1,041,174 983,229 Assets under capital leases 62,677 56,802 ---------------------------------- Net property, plant and equipment 1,594,408 1,648,524 Investment in ShopKo - 209,789 Goodwill 497,389 491,427 Other assets 222,444 202,849 ---------------------------------- Total assets $ 4,336,917 $ 4,283,326 ================================= Liabilities and Stockholders' Equity - ---------------------------------------------------------------------------------------------- Current Liabilities Notes payable $ 194,099 $ 134,272 Accounts payable 1,118,128 923,958 Accrued vacation, compensation and benefits 92,837 89,458 Current maturities of long-term debt 157,716 72,905 Current obligations under capital leases 22,897 21,544 Other current liabilities 107,865 126,941 ---------------------------------- Total current liabilities 1,693,542 1,369,078 Long-term debt 927,720 1,087,162 Long-term obligations under capital leases 342,457 333,429 Deferred income taxes 44,011 38,054 Other liabilities 131,389 148,180 Stockholders' equity Preferred stock 5,908 5,908 Common stock 75,335 75,335 Capital in excess of par value 20,823 13,296 Retained earnings 1,575,515 1,444,755 Treasury stock, at cost (479,783) (231,871) ---------------------------------- Total stockholders' equity 1,197,798 1,307,423 ---------------------------------- Total liabilities and stockholders' equity $ 4,336,917 $ 4,283,326 ================================== Quarterly data subject to year-end audit. See notes to consolidated financial statements.
4 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------------------------------- SUPERVALU INC. and Subsidiaries - --------------------------------------------------------------------------------------------------------------------------------- (In thousands, except per share data) Capital in Preferred Common Excess of Treasury Retained Stock Stock Par Value Stock Earnings Total - --------------------------------------------------------------------------------------------------------------------------------- Balances at February 24, 1996 $ 5,908 $ 75,335 $ 12,737 $ (214,746) $ 1,336,942 $ 1,216,176 Net earnings - - - - 175,044 175,044 Sales of common stock under option plans - - 378 3,786 - 4,164 Cash dividends declared on common stock - $.995 per share - - - - (67,231) (67,231) Compensation under employee incentive plans - - 181 650 - 831 Purchase of shares for treasury - - - (21,561) - (21,561) - --------------------------------------------------------------------------------------------------------------------------------- Balances at February 22, 1997 5,908 75,335 13,296 (231,871) 1,444,755 1,307,423 Net earnings - - - - 179,130 179,130 Sales of common stock under option plans - - 623 35,421 - 36,044 Cash dividends declared on common stock - $.77 per share - - - - (48,370) (48,370) Compensation under employee incentive plans - - 6,904 5,486 - 12,390 Purchase of shares for treasury - - - (288,819) - (288,819) - --------------------------------------------------------------------------------------------------------------------------------- Balances at November 29, 1997 $ 5,908 $ 75,335 $ 20,823 $ (479,783) $ 1,575,515 $ 1,197,798 ================================================================================================================================= Interim data subject to year-end audit. See notes to consolidated financial statements.
5 CONSOLIDATED STATEMENTS OF CASH FLOWS SUPERVALU INC. and Subsidiaries - ------------------------------------------------------------------------------- (In thousands) - -------------------------------------------------------------------------------
Year-to-date (40 weeks ended) - -------------------------------------------------------------------------------------------------------- November 29, November 30, 1997 1996 - -------------------------------------------------------------------------------------------------------- Cash flows from operating activities Net earnings $ 179,130 $ 122,063 Adjustments to reconcile net earnings to net cash provided by operating activities: Equity in earnings and gain on sale of ShopKo (93,364) (9,469) Dividends received from ShopKo - 4,862 Depreciation and amortization 174,844 176,906 Provision for losses on receivables 4,439 6,138 Deferred income taxes 5,957 8,400 Other adjustments, net (3,001) (1,387) Changes in assets and liabilities: Receivables (49,862) (64,383) Inventory (195,252) (252,826) Accounts payable 138,790 94,000 Other assets and liabilities 17,890 57,507 - -------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 179,571 141,811 - -------------------------------------------------------------------------------------------------------- Cash flows from investing activities Proceeds from sale of ShopKo stock 305,153 - Additions to long-term notes receivable (58,650) (41,209) Proceeds received on long-term notes receivable 27,040 21,221 Proceeds from sale of property, plant and equipment 66,971 39,171 Purchase of property, plant and equipment (163,344) (177,237) Business acquisitions, net of cash acquired (23,523) (4,996) Other investing activities (31,424) (31,777) - -------------------------------------------------------------------------------------------------------- Net cash provided by (used in) investing activities 122,223 (194,827) - -------------------------------------------------------------------------------------------------------- Cash flows from financing activities Net increase in checks outstanding, net of deposits 70,576 8,639 Net issuance of short-term notes payable 59,827 133,068 Proceeds from issuance of long-term debt - 3,193 Repayment of long-term debt (74,631) (5,608) Reduction of obligations under capital leases (18,324) (17,562) Proceeds from the sale of common stock under option plans 32,171 2,159 Dividends paid (49,507) (50,109) Payments for purchase of treasury stock (288,819) (18,845) - -------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities (268,707) 54,935 - -------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 33,087 1,919 Cash and cash equivalents at beginning of year 6,539 5,215 - -------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of third quarter $ 39,626 $ 7,134 ======================================================================================================== All data subject to year-end audit. See notes to consolidated financial statements.
6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Accounting Policies - ------------------- The summary of significant accounting policies is included in the notes to consolidated financial statements in the 1997 annual report of SUPERVALU INC. ("SUPERVALU" or the "company"). ShopKo Stores, Inc. Sale - ------------------------ On July 2, 1997, the company exited its 46 percent investment in ShopKo through two simultaneous and cross-conditional transactions: selling 8,174,387 shares back to ShopKo for an aggregate of $150 million and a secondary public offering of 6,557,280 shares. The transactions resulted in proceeds of $305 million and a net gain of $53.7 million. Proceeds were primarily used to repurchase shares of SUPERVALU stock. Treasury Stock Purchase Program - ------------------------------- On June 11, 1997, the Board of Directors approved an additional treasury stock purchase program authorizing the company to repurchase up to 8.5 million shares in anticipation of the sale of its ShopKo holdings. In the second quarter, the company repurchased 6.9 million shares in conjunction with the ShopKo stock sale. These shares were purchased at a cost of $236.5 million. Six million of these shares were purchased from a financial intermediary through an accelerated stock purchase transaction at $34 per share, subject to a market price adjustment provision. In order to complete the transaction, the financial intermediary has borrowed SUPERVALU common shares and is purchasing replacement shares in the open market. The ultimate price per share will be adjusted for changes in the market price of SUPERVALU common stock prior to settlement and a reimbursement for dividends paid on the borrowed shares. The final purchase price and settlement is expected in early January 1998 and will be in either cash or shares of SUPERVALU common stock, at the company's option. The settlement cost, currently estimated at $30 million, will increase the cost of treasury stock as of the date the final purchase price is determined. Statement of Registrant - ----------------------- The data presented herein is unaudited but, in the opinion of management, includes all adjustments necessary for a fair presentation of the consolidated financial position of the company and its subsidiaries at November 29, 1997 and November 30, 1996 and the results of the company's operations and cash flows for the periods then ended. These interim results are not necessarily indicative of the results of the fiscal years as a whole. A limited review of this data has been performed by the company's independent certified public accountants, Deloitte & Touche LLP. A copy of their report is attached as an exhibit to this report. 7 Item 2: Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations --------------------- Results of Operations - --------------------- RESULTS FOR THE QUARTER: The company recorded record sales of $4.0 billion and earnings per share of $.67. Last year sales were $3.9 billion and earnings per share were $.60. The following table sets forth net sales by segment:
Net Sales by Segment - ------------------------------------------------------------------------------------ (In thousands) Third Quarter (12 weeks) - ------------------------------------------------------------------------------------ November 29, 1997 November 30, 1996 Net Sales % of Total Net Sales % of Total - ------------------------------------------------------------------------------------ Food distribution $3,561,766 88.9 % $3,473,122 88.9 % Retail food 1,101,428 27.5 1,084,109 27.8 Less: Eliminations (658,629) (16.4) (652,390) (16.7) - ------------------------------------------------------------------------------------ Total net sales $4,004,565 100.0 % $3,904,841 100.0 % ====================================================================================
NET SALES Net sales were favorable compared to last year, positively impacted by a 2.6 percent increase in food distribution sales and a 1.6 percent increase in retail food sales. Food distribution sales increased over last year due to the addition of new customers, partially offset by the loss of retail customers and competitive market conditions. Food price inflation, as measured by the company was .1 percent for the quarter. Retail food sales increased over last year primarily due to new store openings over the past twelve months and an increase in same- store sales of 1.2 percent. The same-store sales improvement from second quarter benefited primarily due to strengthening in the company's position as the low-price value leader in the Chicago market and improved performance in Cincinnati, which faced increased competition starting in the third quarter last year. The favorable retail food sales were partially offset by the closing or sale of eighteen stores over the past twelve months. GROSS PROFIT Gross profit as a percentage of net sales was 10.1 percent compared with 9.9 percent last year. Food distribution gross profit margin was even with last year. A favorable change in food distribution LIFO expense of $4.1 million was substantially offset by increased costs due to production line changes in the manufacturing operations. Retail food gross profit margin increased due to ongoing merchandising activities. 8 SELLING AND ADMINISTRATIVE EXPENSES Selling and administrative expenses were 7.8 percent of net sales compared with 7.6 percent last year. Food distribution expenses continue to be negatively impacted by increased technology related spending in support of new systems as well as to make systems year 2000 ready. Retail food expenses were higher than last year primarily due to increased marketing efforts to drive sales and higher labor expenses related to perishable department expansions. OPERATING EARNINGS The company's pre-tax operating earnings (earnings before interest, corporate expenses, equity in earnings of ShopKo Stores, Inc. ("ShopKo") and taxes) increased to $97.9 million compared with $93.5 million last year. Food distribution operating earnings decreased 2.5 percent to $76.6 million from $78.6 million. Retail food operating earnings increased 43.0 percent to $21.3 million from $14.9 million. INTEREST EXPENSE AND INCOME Interest expense decreased to $29.9 million compared with $32.5 million last year, reflecting a reduction in debt levels. Interest income increased to $4.8 million compared with $3.2 million last year, primarily due to the addition of notes receivable and new capital subleases. EQUITY IN EARNINGS OF SHOPKO During the second quarter, the company exited its 46 percent investment in ShopKo. Due to the sale, there was no equity in earnings recorded in the quarter compared with $5.0 million or $.07 per share last year. INCOME TAXES The effective tax rate increased to 40.2 percent in the quarter compared with 37.7 percent last year. The increase in the effective tax rate was due to the elimination of ShopKo earnings. NET EARNINGS Net earnings were $40.2 million or $.67 per share compared with last year's $40.2 million or $.60 per share. Weighted average shares declined to 60.2 million compared with last year's 67.1 million primarily due to the repurchase of 6.9 million shares with proceeds from the ShopKo transaction. 9 YEAR-TO-DATE RESULTS: The following table sets forth net sales by segment:
Net Sales by Segment - ------------------------------------------------------------------------------------- (In thousands) Year-to-Date (40 weeks) - ------------------------------------------------------------------------------------- November 29, 1997 November 30, 1996 Net Sales % of Total Net Sales % of Total - ------------------------------------------------------------------------------------- Food distribution $11,396,050 88.3 % $11,202,722 88.5 % Retail food 3,547,526 27.5 3,494,220 27.6 Less: Eliminations (2,039,696) (15.8) (2,034,595) (16.1) - ------------------------------------------------------------------------------------- Total net sales $12,903,880 100.0 % $12,662,347 100.0 % =====================================================================================
NET SALES Net sales were favorable compared to last year, positively impacted by a 1.7 percent increase in food distribution sales and a 1.5 percent increase in retail food sales. Food distribution sales increased over last year due to the addition of new customers, despite last year's planned discontinuance of service to a major customer in the Southeast and competitive market conditions. Food price inflation, as measured by the company was .4 percent year-to-date. Retail food sales were favorable compared to last year primarily due to new store openings, partially offset by the closing or sale of underperforming stores and a decrease in same-store sales of 1.0 percent due to competitive market conditions. GROSS PROFIT Gross profit as a percentage of net sales increased to 10.1 percent compared with 9.8 percent last year. Food distribution gross profit margin was comparable to last year. Retail food gross profit margin increased due to ongoing merchandising activities. SELLING AND ADMINISTRATIVE EXPENSES Selling and administrative expenses were 7.8 percent of net sales compared with 7.6 percent last year. Food distribution expenses continued to be negatively impacted by increased technology related spending in support of new systems as well as to make systems year 2000 ready. Retail food expenses were impacted by unfavorable wage expenses related to both increased union rates and expansion of perishable departments. OPERATING EARNINGS The company's pre-tax operating earnings (earnings before interest, corporate expenses, equity in earnings and gain on sale of ShopKo, and taxes) increased to $311.6 million compared with $299.6 million last year. Food distribution operating earnings decreased 1.6 percent to $233.8 million from $237.6 million. Retail food operating earnings increased 25.6 percent to $77.8 million from $62.0 million. 10 INTEREST EXPENSE AND INCOME Interest expense decreased to $101.0 million compared with $105.1 million last year, reflecting a reduction in debt levels. Interest income increased to $13.8 million compared with $11.9 million last year, primarily due to the addition of notes receivable and new capital subleases. EQUITY IN EARNINGS AND GAIN ON SALE OF SHOPKO On July 2, 1997, the company exited its 46 percent investment in ShopKo through two simultaneous and cross-conditional transactions: selling 8,174,387 shares back to ShopKo for an aggregate of $150 million and a secondary public offering of 6,557,280 shares. The transactions resulted in proceeds of $305 million and a pretax gain of $90.0 million. Equity in earnings for the year-to-date were $3.3 million or $.05 per share compared with $9.5 million or $.14 per share last year. INCOME TAXES The effective tax rate increased to 40.0 percent compared with 38.6 percent last year due to the elimination of ShopKo earnings. NET EARNINGS Net earnings were $179.1 million or $2.82 per share compared with last year's $122.1 million or $1.81 per share. Excluding the gain on the sale of ShopKo, net earnings were $125.5 million or $1.97 per share. Weighted average shares declined to 63.5 million compared with last year's 67.4 million primarily due to the repurchase of 6.9 million shares in the second quarter with proceeds from the ShopKo transaction. 11 Liquidity and Capital Resources - ------------------------------- Internally generated funds, principally from the company's food distribution business, continued to be the major source of capital for liquidity and capital growth. Cash provided from operations year-to-date was $179.6 million compared with $141.8 million last year. The increase was primarily affected by inventory and accounts payable trends. Cash provided from operations of $179.6 million and issuance of short term notes payable of $59.8 million was primarily used to finance capital expenditures of $163.3 million and repay long-term debt of $74.6 million. The proceeds from the ShopKo transaction were used to repurchase shares under the June 1997 treasury stock purchase program. During the second quarter, the company repurchased 6.9 million shares at a cost of $236.5 million. Six million of these shares were purchased from a financial intermediary through an accelerated stock purchase transaction, subject to a market price adjustment provision. In order to complete the transaction, the financial intermediary has borrowed SUPERVALU common shares and is purchasing replacement shares in the open market through early January 1998. The market price adjustment is currently estimated at $30 million and will increase the cost of treasury stock as of the date the final purchase price is determined. Under the August 1996 treasury stock program, the company repurchased .6 million and 1.3 million shares at a cost of $23.6 million and $52.3 million for the quarter and year-to- date, respectively to be used for employee stock option exercises and compensation programs. SUPERVALU will continue to use short-term and long-term debt as a supplement to internally generated funds to finance its activities. The company has a shelf registration in effect pursuant to which the company could issue $242.5 million of additional debt securities. In October, the company renegotiated its $400 million revolving credit agreement to obtain more favorable terms and extend the expiration date to October 2002. Maturities of debt issued will depend on management's views with respect to the relative attractiveness of interest rates at the time of issuance. CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The information in this 10Q includes forward-looking statements. Important risks and uncertainties that could cause actual results to differ materially from those discussed in such forward looking statements are detailed in Exhibit 99.1; other risks or uncertainties may be detailed from time to time in the company's future Securities and Exchange Commission filings. 12 PART II - OTHER INFORMATION --------------------------- Item 6. Exhibits and Reports on Form 8-K. - ------- --------------------------------- (a) Exhibits filed with this Form 10-Q: (10)a. Credit Agreement dated as of October 8, 1997 among the Registrant; the Lenders named therein; Bankers Trust Company, as Agent; Citibank, N.A., as Syndication Agent; First Bank National Association, The Fuji Bank, Limited, Nationsbank, N.A., and PNC Bank, National Association, as Co-Agents; and Bank of America National Trust & Savings Association, The Bank of New York, The First National Bank of Chicago, Fleet National Bank, Morgan Guaranty Trust Company of New York and Norwest Bank Minnesota, National Association, as Lead Managers. (10)b. SUPERVALU INC. 1983 Employee Stock Option Plan, as amended. (10)c. SUPERVALU INC. 1993 Stock Plan, as amended. (15) Letters from Deloitte & Touche regarding unaudited interim financial information. (27) Financial Data Schedule. (99.1) Cautionary Statements pursuant to the Securities Litigation Reform Act. (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SUPERVALU INC. (REGISTRANT) Dated: December 23, 1997 By: /s/ Pamela K. Knous --------------------------- Pamela K. Knous Executive Vice President, Chief Financial Officer (Authorized officer of Registrant) 13 EX-10.A 2 CREDIT AGREEMENT EXHIBIT (10)a. U.S. $400,000,000 CREDIT AGREEMENT Dated as of October 8, 1997 Among SUPERVALU INC., as Borrower, ----------- and THE LENDERS NAMED HEREIN, as Lenders, ---------- BANKERS TRUST COMPANY, as Agent, -------- and CITIBANK, N.A., as Syndication Agent, -------------------- FIRST BANK NATIONAL ASSOCIATION, THE FUJI BANK, LIMITED, NATIONSBANK, N.A. and PNC BANK, NATIONAL ASSOCIATION, as Co-Agents, -- --------- and BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, THE BANK OF NEW YORK, THE FIRST NATIONAL BANK OF CHICAGO, FLEET NATIONAL BANK, MORGAN GUARANTY TRUST COMPANY OF NEW YORK and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Lead Managers ---------------- T A B L E O F C O N T E N T S ---------------------------------- Section Page ARTICLE I DEFINITIONS AND ACCOUNTING TERMS................................ 1 1.01. Certain Defined Terms.............................................. 1 1.02. Computation of Time Periods........................................ 13 1.03. Accounting Terms................................................... 14 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES.............................. 14 2.01. The A Advances..................................................... 14 2.02. Making the A Advances.............................................. 14 2.03. The B Advances..................................................... 16 2.04. Swingline Loans.................................................... 19 2.05. Letters of Credit.................................................. 20 2.06. Fees............................................................... 23 2.07. Termination or Reduction of the Commitments or the Swingline Commitment; Voluntary Reduction; Increase in Aggregate Commitment....................................................... 24 2.08. Repayment of A Advances, B Advances and Swingline Loans............ 25 2.09. Interest on Advances and Swingline Loans........................... 25 2.10. Additional Interest on Eurodollar Rate Advances.................... 26 2.11. Interest Rate Determination........................................ 26 2.12. Voluntary Conversion of A Advances................................. 28 2.13. Prepayments of A Advances and Swingline Loans...................... 28 2.14. Increased Costs.................................................... 28 2.15. Illegality......................................................... 29 2.16. Payments and Computations.......................................... 30 2.17. Sharing of Payments, Etc........................................... 31 2.18. Taxes............................................................... 31 2.19. Use of Proceeds..................................................... 33 2.20. Termination Date Extensions......................................... 33 2.21. Replacement of Lenders.............................................. 34 ARTICLE III CONDITIONS OF LENDING......................................... 35 3.01. Conditions Precedent to the Effectiveness of Sections 2.01, 2.03, 2.04 and 2.05.................................................... 35 3.02. Conditions Precedent to Each A Borrowing, Swingline Borrowing and Issuance of a Letter of Credit............................... 37 3.03. Conditions Precedent to Each B Borrowing........................... 37 ARTICLE IV REPRESENTATIONS AND WARRANTIES................................. 38 4.01. Representations and Warranties of the Borrower..................... 38 i ARTICLE V COVENANTS OF THE BORROWER....................................... 41 5.01. Affirmative Covenants.......................................... 41 5.02. Negative Covenants............................................. 44 ARTICLE VI EVENTS OF DEFAULT.............................................. 48 6.01. Events of Default.............................................. 48 ARTICLE VII THE AGENT..................................................... 51 SECTION 7.01 Appointment............................................. 51 SECTION 7.02. Nature of Duties........................................ 51 SECTION 7.03. Exculpation, Rights Etc................................. 51 SECTION 7.04 Reliance................................................ 52 SECTION 7.05 Indemnification......................................... 52 SECTION 7.06 Agent In Its Individual Capacity........................ 52 SECTION 7.07 Notice of Default....................................... 53 SECTION 7.08 Holders of Obligations.................................. 53 SECTION 7.09 Resignation by the Agent................................ 53 ARTICLE VIII MISCELLANEOUS................................................ 54 8.01. Amendments, Etc................................................ 54 8.02. Notices, Etc................................................... 54 8.03. No Waiver; Remedies............................................ 55 8.04. Costs and Expenses............................................. 55 8.05. Right of Setoff................................................ 55 8.06. Binding Effect................................................. 56 8.07. Assignments and Participations................................. 56 8.08. Indemnification................................................ 58 8.09. Governing Law; Submission to Jurisdiction...................... 58 8.10. Execution in Counterparts...................................... 58 8.11. Confidentiality................................................ 59 8.12. WAIVER OF JURY TRIAL, ETC...................................... 59 ii Schedule I - Commitments Schedule II - List of Applicable Lending Offices Schedule III - Litigation Schedule IV - Existing Subsidiary Debt Exhibit A-1 - Form of A Note Exhibit A-2 - Form of B Note Exhibit B-1 - Notice of A Borrowing Exhibit B-1 - Notice of B Borrowing Exhibit C - Form of Assignment and Assumption Agreement Exhibit D - Form of Opinion of Dorsey & Whitney, Special Counsel for the Borrower Exhibit E - Form of Opinion of Teresa H. Johnson, Associate General Counsel of the Borrower iii CREDIT AGREEMENT Dated as of October 8, 1997 SUPERVALU INC., a Delaware corporation (the "Borrower"), the lenders (together with any other lender that hereafter becomes a party to this Agreement, the "Lenders") listed on the signature pages hereof, BANKERS TRUST COMPANY ("Bankers Trust"), as agent for the Lenders hereunder (the "Agent"), CITIBANK, N.A., as syndication agent (the "Syndication Agent"), FIRST BANK NATIONAL ASSOCIATION, THE FUJI BANK, LIMITED, NATIONSBANK, N.A. and PNC BANK, NATIONAL ASSOCIATION, each as a co-agent (the "Co-Agents"), and BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, THE BANK OF NEW YORK, THE FIRST NATIONAL BANK OF CHICAGO, FLEET NATIONAL BANK, MORGAN GUARANTY TRUST COMPANY OF NEW YORK and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, each as a lead manager (the "Lead Managers"), agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms. As used in this Agreement. the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "A Advance" means an advance by a Lender to the Borrower as part of an A Borrowing and refers to a Base Rate Advance or a Eurodollar Rate Advance, each of which shall be a "Type" of A Advance. "A Borrowing" means a borrowing consisting of simultaneous A Advances of the same Type made by each of the Lenders pursuant to Section 2.01. "A Note" means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit A-1 hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the A Advances made by such Lender. "Advance" means an A Advance or a B Advance. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and of "under common control with") as used with respect to any Person or group of Persons, shall mean possession, directly or indirectly, of the power to direct or cause the direction of management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Applicable Facility Fee Rate" means, for any period, a percentage per annum equal to the percentage set forth below determined by reference to the higher of (x) the rating of the Borrower's long-term, senior unsecured Debt from S&P or (y) the rating of the Borrower's long-term, senior unsecured Debt from Moody's, in each case as in effect from time to time during such period:
Borrower's Long-Term Senior Unsecured Debt Rating Applicable S&P or Moody's Facility Fee Rate - ----------------------------------------------------------------------------- Level 1 A or A2 or better .070% - ----------------------------------------------------------------------------- Level 2 A- or A3 or better .080% - ----------------------------------------------------------------------------- Level 3 BBB+ or Baa1 or better .090% - ----------------------------------------------------------------------------- Level 4 BBB or Baa2 or better .110% - ----------------------------------------------------------------------------- Level 5 BBB- or Baa3 or better .140% - ----------------------------------------------------------------------------- Level 6 Equal to BB+ or Ba1 or below .170% - -----------------------------------------------------------------------------
;provided that if, at any time, no rating is available from S&P, Moody's or any other nationally recognized statistical rating organization designated by the Borrower and approved in writing by the Majority Lenders, the Applicable Facility Fee Rate shall be .170%; and provided further that upon the occurrence of a ratings differential between S&P and Moody's, the Applicable Facility Fee Rate shall be the Level of the higher rating. "Applicable Interest Rate Margin" means, for any Interest Period, a percentage per annum equal to the percentage set forth below determined by reference to the higher of (x) the rating of the Borrower's long-term, senior unsecured Debt from S&P or (y) the rating of the Borrower's long- term, senior unsecured Debt from Moody's, in each case as in effect on the first day of such Interest Period: 2
Applicable Interest Rate Margin (basis points) ------------------------------------------------------------- Borrower's If less than If 50% or Long-Term Senior 50% of the greater of Unsecured Debt Rating Lenders' the Lenders' S&P or Moody's Commitments Commitments are drawn (including giving are drawn (including giving effect to any B Advances, effect to any B Advances, Swingline Loans and Letter Swingline Loans and Letter of Credit Liabilities) of Credit Liabilities) - ------------------------------------------------------------------------------------------------- Level 1 A or A2 or better .150% .200% - ------------------------------------------------------------------------------------------------- Level 2 A- or A3 or better .160% .235% - ------------------------------------------------------------------------------------------------- Level 3 BBB+ or Baa1 or better .180% .275% - ------------------------------------------------------------------------------------------------- Level 4 BBB or Baa2 or better .180% .280% - ------------------------------------------------------------------------------------------------- Level 5 BBB- or Baa3 or better .300% .400% - ------------------------------------------------------------------------------------------------- Level 6 Equal to BB+ or Ba1 or below .325% .450% - -------------------------------------------------------------------------------------------------
;provided that if, at any time, no rating is available from S&P, Moody's or any other nationally recognized statistical rating organization designated by the Borrower and approved in writing by the Majority Lenders, the Applicable Interest Rate Margin for such Interest Period shall be .325% if less than 50% of the Lenders' Commitments are drawn and .450% if 50% or greater of the Lenders' Commitments are drawn; and provided further that upon the occurrence of a ratings differential between S&P and Moody's, the Applicable Interest Rate Margin shall be the Level of the higher rating. "Applicable Lending Office" means, with respect to each Lender, such Lender's Domestic Lending Office in the case of a Base Rate Advance, such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance and, in the case of a B Advance, the office of such Lender notified by such Lender to the Agent as its Applicable Lending Office with respect to such B Advance. 3 "Assignment and Assumption Agreement" means an assignment and assumption agreement entered into by a Lender and an Eligible Assignee, and accepted by the Agent, in substantially the form of Exhibit C hereto. "Available LC Amount" means at any time an amount equal to the lesser of (i) $150,000,000 and (ii) the excess, if any, of the aggregate amount of the Commitments over the aggregate outstanding amount of A Advances plus B Advances plus Swingline Loans at such time. "B Advance" means an advance by a Lender to the Borrower as part of a B Borrowing resulting from the auction bidding procedure described in Section 2.03. "B Borrowing" means a borrowing consisting of simultaneous B Advances from each of the Lenders whose offer to make one or more B Advances as part of such borrowing has been accepted by the Borrower under the auction bidding procedure described in Section 2.03. "B Note" means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit A-2 hereto, evidencing the indebtedness of the Borrower to such Lender resulting from a B Advance made by such Lender. "B Reduction" has the meaning specified in Section 2.01. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. "Base Rate Advance" means an A Advance that bears interest as provided in Section 2.09(a)(i). "Borrowing" means an A Borrowing, a B Borrowing or a Swingline Borrowing. "Business Day" means a day of the year on which banks are not required or authorized to close in New York City and London and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market. "Capital Lease" shall mean a lease meeting one or more of the criteria set forth in paragraph 7 of the Statement of Financial Accounting Standards No. 13 of the Financial Accounting Standards Board (as in effect from time to time or as set forth in a statement of generally accepted accounting principles superseding such paragraph 7). 4 "Commercial Letters of Credit" means the commercial Letters of Credit issued by the LC Bank for the account of the Borrower pursuant to Section 2.05, each of which is drawable upon presentation of documents evidencing the sale or shipment of goods purchased by the Borrower or any of its Subsidiaries in the ordinary course of its business. "Commitment" has the meaning specified in Section 2.01. "Consolidated" refers to the consolidation of accounts of the Borrower and its Subsidiaries in accordance with generally accepted accounting principles, including principles of consolidation, consistently applied. "Consolidated Tangible Assets" means at any date the sum of the Tangible Assets of the Borrower and its Consolidated Subsidiaries after eliminating intercompany items, all determined in accordance with generally accepted accounting principles, including appropriate deductions for any minority interest in Tangible Assets of such Consolidated Subsidiaries; provided that the Consolidated assets of the Borrower and its Subsidiaries shall be determined by reference to the most recent financial statements of the Borrower delivered pursuant to Section 5.01(e)(i)(x) or (y). "Convert", "Conversion" and "Converted" each refers to a conversion of Advances of one Type into Advances of another Type pursuant to Section 2.15 or 2.12. "Current Supervalu Credit Agreement" means the Credit Agreement dated as of May 26, 1995, as amended, supplemented or otherwise modified, among the Borrower, the banks parties thereto, Citibank, N.A., as agent, First Bank National Association, PNC Bank, National Association, NationsBank, N.A. (f/k/a Nationsbank, N.A. (Carolinas)) and The Fuji Bank, Limited, Chicago Branch, as co-agents, and Morgan Guaranty Trust Company of New York, Royal Bank of Canada and Fleet National Bank (f/k/a Shawmut Bank, N.A.), as lead managers. "Debt" of any Person means (i) indebtedness of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services that exceed, on an individual basis, $1,000,000 (for any obligation or group of related obligations), (iv) the present value of all obligations of such Person as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as Capital Leases and (v) all obligations of such Person under direct or indirect guaranties in respect of, and all obligations (contingent or otherwise) of such Person to purchase or otherwise acquire, or otherwise to assure a creditor 5 against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (iv) above. "Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule II hereto or in the Assignment and Assumption Agreement pursuant to which it became a Lender or in the agreement required by Section 2.07(b) pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Agent. "Effective Date" means the first date on which the conditions set forth in Section 3.01 applicable to the effectiveness of Sections 2.01, 2.03, 2.04 and 2.05 have been satisfied. "Eligible Assignee" means (i) a commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $1,000,000,000; (ii) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $1,000,000,000; (iii) a commercial bank organized under the laws of any other country which is a member of the OECD or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow, or a political subdivision of any such country, and having total assets in excess of $1,000,000,000, provided that such bank is acting through such bank's branch or agency, located in the United States; (iv) the central bank of any country which is a member of the OECD; (v) a commercial finance company organized under the laws of the United States, or any State thereof, and having total assets in excess of $1,000,000,000; (vi) any Lender; (vii) an Affiliate of any Lender; and (viii) such other bank, company, financial institution or fund to which the Borrower shall consent; provided, however, that notwithstanding anything to the contrary set forth in this Agreement, no Person that is organized under the laws of a jurisdiction outside the United States shall be an Eligible Assignee if, at the time of an assignment pursuant to Section 8.07, such Person would be subject to United States interest withholding tax at a rate greater than zero; provided further, however, that neither the Borrower nor any Affiliate of the Borrower shall qualify as an Eligible Assignee. "Environmental Action" means any administrative, regulatory or judicial action, suit, demand, demand letter, claim, notice of noncompliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating to any Environmental Law, Environmental Permit or Hazardous Material or arising from alleged injury or threat of injury to health, 6 safety or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or any third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief. "Environmental Law" means any federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, judgment, decree or judicial or agency interpretation, policy or guidance relating to the environment, health, safety or Hazardous Materials. "Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" of any Person means any other Person that for purposes of Title IV of ERISA is a member of such Person's controlled group, or under common control with such Person, within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended from time to time. "ERISA Event" with respect to any Person means (a) the occurrence of a material reportable event, within the meaning of Section 4043 of ERISA, with respect to any Plan of such Person or any of its ERISA Affiliates, unless the 30-day notice requirement with respect to such event has been waived by the PBGC; (b) the application for a minimum funding waiver with respect to any Plan of such Person or any of its ERISA Affiliates; (c) the provision by the administrator of any Plan of such Person or any of its ERISA Affiliates of a notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of such Person or any of its ERISA Affiliates in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by such Person or any of its ERISA Affiliates from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) the failure by such Person or any of its ERISA Affiliates to make a payment to a Plan if the conditions for the imposition of a lien under Section 302(f)(1) of ERISA are satisfied; (g) the adoption of an amendment to a Plan of such Person or any of its ERISA Affiliates requiring the provision of security to such Plan, pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to terminate a Plan of such Person or any of its ERISA Affiliates, pursuant to Section 4042 of ERISA (other than subsection (a)(4) thereof), or the occurrence of any event or condition 7 described in Section 4042 of ERISA that could constitute grounds for the termination of, or the appointment of a trustee to administer, such Plan. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" opposite its name on Schedule II hereto or in the Assignment and Assumption Agreement pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office) or in the agreement required by Section 2.07(b) pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Agent. "Eurodollar Rate" means, for any Interest Period for each Eurodollar Rate Advance comprising part of the same A Borrowing, an interest rate per annum equal to the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two (2) Business Days before the first day of such Interest Period in an amount substantially equal to the greater of (i) $1,000,000 and (ii) such Reference Bank's Eurodollar Rate Advance comprising part of such A Borrowing, and for a period equal to such Interest Period. The Eurodollar Rate for any, Interest Period for each Eurodollar Rate Advance comprising part of the same A Borrowing shall be determined by the Agent on the basis of applicable rates furnished to and received by the Agent from the Reference Banks two (2) Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.11. "Eurodollar Rate Advance" means an A Advance that bears interest as provided in Section 2.09(a)(ii). "Eurodollar Rate Reserve Percentage" of any Lender for any Interest Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for such Lender with respect to liabilities or assets consisting 8 of or including Eurocurrency Liabilities having a term equal to such Interest Period. "Events of Default" has the meaning specified in Section 6.01. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of nationally recognized standing selected by it. "Financial Officer" means, for any Person, the chief executive officer, the chief financial officer, the senior vice president-finance, the chief accounting officer, the treasurer or the controller of such Person or any assistant treasurer or any assistant controller of such Person previously identified in writing to the Agent. "Hazardous Materials" means petroleum and petroleum products, byproducts or breakdown products, radioactive materials, asbestos- containing materials, radon gas and any other chemicals, materials or substances designated, classified or regulated as being "hazardous" or "toxic", or words of similar import, under any federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, judgment, decree or judicial or agency interpretation, policy or guidance. "Holding Account" means an interest-bearing deposit account belonging to the Agent for the benefit of the Lenders into which the Borrower may be required to make cash deposits pursuant to the provisions of this Agreement, such account to be under the sole dominion and control of the Agent and not subject to withdrawal by the Borrower, with any amounts therein to be held for application toward payment of any outstanding Letters of Credit when drawn upon. "Insufficiency" means, with respect to any Plan of the Borrower or any of its ERISA Affiliates, the amount, if any, of "unfunded benefit liabilities" (as defined in Section 4001(a)(18) of ERISA) for such Plan. "Interest Period" means, for each Eurodollar Rate Advance comprising part of the same A Borrowing, the period commencing on the date of such Eurodollar Rate Advance or the date of the Conversion of any A Advance into such a Eurodollar Rate Advance and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent 9 period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period for a Eurodollar Rate Borrowing shall be 1, 2, 3 or 6 months and, if available to all Lenders, 9 or 12 months, in each case as the Borrower may, upon notice received by, the Agent not later than 11:00 A. M. (New York City time) on the third Business Day, prior to the first day of such Interest Period, select; provided, however, that: (i) the duration of any Interest Period which commences before the Termination Date and would otherwise end after such date shall end on such date; (ii) Interest Periods commencing on the same date for Eurodollar Advances comprising part of the same A Borrowing shall be of the same duration; (iii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and (iv) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month. "LC Bank" means such Lender as is designated as the LC Bank for any Letter of Credit by written notice to the Agent from such Lender and the Borrower, in such Bank's capacity as LC Bank under the letter of credit facility described in Section 2.05, and its successors in such capacity. "LC Exposure" means, at any time and for any Lender, an amount equal to such Lender's Percentage of the aggregate amount of Letter of Credit Liabilities in respect of all outstanding Letters of Credit at such time. "Lenders" means the banks and each Eligible Assignee that shall become a party hereto pursuant to Section 2.07(b) or Section 8.07(c). "Letter of Credit Liabilities" means, at any time and in respect of any Letter of Credit, the sum, without duplication, of (i) the amount available for 10 drawing under such Letter of Credit plus (ii) the aggregate unpaid amount of all Reimbursement Obligations in respect of previous drawings made under such Letter of Credit. "Letters of Credit" means the Commercial Letters of Credit and the Standby Letters of Credit. "Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement concerning property, including, without limitation, the lien or retained security title of a conditional vendor and any other encumbrance on title to real property to secure repayment of a liability. "Loan Documents" means this Agreement and the Notes. "Majority Lenders" means at any time Lenders holding at least 51% of the then aggregate unpaid principal amount of the A Notes plus the then aggregate unpaid amount of Reimbursement Obligations held by Lenders, or, if no such principal amount is then outstanding, Lenders having at least 51% of the Commitments (or if the aggregate Commitment has been terminated, Lenders holding at least 51% of the then aggregate unpaid principal amount of the Notes plus the then aggregate unpaid amount of Reimbursement Obligations). "Moody's" means Moody's Investors Service, Inc. "Multiemployer Plan" of any Person means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which such Person or any of its ERISA Affiliates is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "Multiple Employer Plan" of any Person means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of such Person or any of its ERISA Affiliates and at least one Person other than such Person and its ERISA Affiliates or (b) was so maintained and in respect of which such Person or any of its ERISA Affiliates could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "Net Worth" means the excess of total assets over total liabilities, total assets and total liabilities each to be determined in accordance with generally accepted accounting principles, consistently applied. "Note" means an A Note or a B Note. "Notice of A Borrowing" has the meaning specified in Section 2.02(a). 11 "Notice of B Borrowing" has the meaning specified in Section 2.03(a). "Notice of Swingline Borrowing" has the meaning specified in Section 2.04(b). "OECD" means the Organization for Economic Cooperation and Development. "PBGC" means the Pension Benefit Guaranty Corporation or any successor corporation thereto. "Percentage" means, with respect to each Lender, the percentage equal to a fraction the numerator of which is the amount of such Lender's Commitment (or, in the event the Commitments have been terminated, such Lender's Commitment as is in effect immediately prior to such termination) and the denominator of which is the aggregate amount of the Commitments (or, in the event the Commitments have been terminated, the aggregate amount of the Commitments as in effect immediately prior to such termination) of the Lenders. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Plan" means a Single Employer Plan or a Multiple Employer Plan, but does not include any such plan with a total projected benefit obligation of less than $20,000,000. "Prime Rate" means the rate of interest publicly announced by Bankers Trust in New York City from time to time as its "prime rate", which is not necessarily the lowest rate made available by Bankers Trust. The "prime rate" announced by Bankers Trust is evidenced by the recording thereof after its announcement in such internal publication or publications as Bankers Trust may designate. Any change in the interest rate resulting from a change in such "prime rate" announced by Bankers Trust shall become effective without prior notice to the Borrower as of 12:01 A.M. (New York City time) on the Business Day on which each change in such "prime rate" is announced by Bankers Trust. Bankers Trust may make commercial or other loans to others at rates of interest at, above or below its "prime rate". "Reference Banks" means Bankers Trust, Citibank, N.A. and NationsBank, N.A. or any successor Reference Bank appointed pursuant to Section 2.11(d). 12 "Reimbursement Obligations" means at any date the obligations of the Borrower then outstanding under Section 2.05 to reimburse the LC Bank for the amount paid by the LC Bank in respect of a drawing under a Letter of Credit. "S&P" means Standard & Poor's Rating Group, a division of McGraw-Hill, Inc. "Single Employer Plan" of any Person means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of such Person or any of its ERISA Affiliates and no Person other than such Person and its ERISA Affiliates or (b) was so maintained and in respect of which such Person or any of its ERISA Affiliates could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "Standby Letter of Credit" means any letter of credit other than a Commercial Letter of Credit issued by an LC Bank for the account of the Borrower pursuant to Section 2.05. "Subsidiary" of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "Swingline Borrowing" means a borrowing consisting of a Swingline Loan made pursuant to Section 2.04. "Swingline Commitment" means the obligation of the Swingline Lender to make Swingline Loans to the Borrower in aggregate principal amount at any one time outstanding not to exceed the lesser of (i) $10,000,000 and (ii) the excess, if any, of the Swingline Lender's Commitment as a Lender over the sum of (x) the aggregate outstanding principal amount of the Swingline Lender's A Advances as a Lender plus (y) the Swingline Lender's LC Exposure as a Lender, in each case at such time. "Swingline Lender" means Bankers Trust, in its capacity as the Swingline Lender under the Swingline facility described in Section 2.04, and its successors in such capacity. 13 "Swingline Loan" means a loan made by the Swingline Lender pursuant to Section 2.04. "Tangible Assets" of any Person means, at any date, the gross book value as shown by the accounting books and records of such Person (maintained in accordance with generally accepted accounting principles) of all its property both real and personal, less (i) the net book value of all its licenses, patents, patent applications, copyrights, trademarks, trade names, goodwill, non-compete agreements or organizational expenses and other like intangibles, (ii) unamortized indebtedness discount and expense, (iii) all reserves for depreciation, obsolescence, depletion and amortization of its properties and (iv) all other proper valuation reserves against assets which in accordance with generally accepted accounting principles should be provided in connection with the business conducted by such Person. "Termination Date" means the earlier of the date which is the fifth anniversary of the Effective Date (as the same may be extended pursuant to Section 2.20 up to the eighth anniversary of the Effective Date) and the date of termination in whole of the Commitments pursuant to Section 2.07 or 6.01. "Total Capital" means, as of any date, the sum of (a) Consolidated Debt and (b) Consolidated Net Worth. "Type" of A Advance shall mean Base Rate Advance or Eurodollar Rate Advance. "Welfare Plan" means a welfare plan, as defined in Section 3(1) of ERISA. "Withdrawal Liability" has the meaning specified in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding". SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistently applied. 14 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The A Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make A Advances to the Borrower from time to time on any Business Day during the period from the date hereof until the Termination Date in amounts such that the sum of (x) the aggregate principal amount of A Advances by such Lender plus (y) such Lender's Percentage of the aggregate principal amount of Swingline Loans plus (z) such Lender's LC Exposure at any one time outstanding shall not exceed the amount set forth opposite such Lender's name on Schedule I hereto or, if such Lender has entered into any Assignment and Assumption Agreement, the amount set forth for such Lender in such Assignment and Assumption Agreement or, if such Lender has entered into an agreement required by Section 2.07(b), the amount set forth for such Lender in such agreement (as each such amount may be reduced pursuant to Section 2.07) (such amount, such Lender's "Commitment"); provided that the aggregate amount of the Commitments of the Lenders shall be deemed used from time to time to the extent of the aggregate amount of the B Advances then outstanding and such deemed use of the aggregate amount of the Commitments shall be applied to the Lenders ratably according to their respective Commitments (such deemed use of the aggregate amount of the Commitments being a "B Reduction"); and provided further that in no event shall the Swingline Lender be obligated to make any loan hereunder if, after making such loan and giving effect to the application of any funds made available at such time to prepay or repay any outstanding Swingline Loan, the sum of (A) the aggregate principal amount of A Advances, Swingline Loans and LC Exposure at such time outstanding exceeds an amount equal to (I) the aggregate Commitment less (II) the aggregate B Reduction . Each A Borrowing shall be in an aggregate amount not less than $20,000,000 or an integral multiple of $1,000,000 in excess thereof (or, if less, an aggregate amount equal to the difference between the aggregate amount of a proposed B Borrowing requested by the Borrower and the aggregate amount of B Advances offered to be made by the Lenders and accepted by the Borrower in respect of such B Borrowing, if such B Borrowing is made on the same date as such A Borrowing) and shall consist of A Advances of the same Type made on the same day by the Lenders ratably according to their respective Commitments. Within the limits of each Lender's Commitment, the Borrower may from time to time borrow under this Section 2.01, prepay pursuant to Section 2.13(b) and reborrow under this Section 2.01. SECTION 2.02. Making the A Advances. (a) Each A Borrowing shall be made on notice, given not later than 11:00 A.M. (New York City time) (i) on the same Business Day as the proposed A Borrowing in the case of an A Borrowing consisting of Base Rate Advances or (ii) on the third Business Day prior to the date of the proposed A Borrowing in the case of an A Borrowing consisting of Eurodollar Rate Advances, by the Borrower to the Agent, which shall give to each Lender prompt notice thereof by telecopier, telex or cable. Each such notice of an A Borrowing (a "Notice of A Borrowing") shall be by 15 facsimile transmission, or by telex or cable (confirmed immediately in writing), in substantially the form of Exhibit B-1 hereto, specifying therein the requested (i) date of such A Borrowing, (ii) Type of A Advances comprising such A Borrowing, (iii) aggregate amount of such A Borrowing, and (iv) in the case of an A Borrowing comprised of Eurodollar Rate Advances, the initial Interest Period for each such A Advance. Each Lender shall, before 1:00 P.M. (New York City time) on the date of such A Borrowing, make available for the account of its Applicable Lending Office to the Agent at its address referred to in Section 8.02, in same day funds, such Lender's ratable portion of such A Borrowing. After the Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Agent will make such funds available to the Borrower at the Agent's aforesaid address not later than 2:00 P.M. (New York City time) on such date. (b) Anything in subsection (a) above to the contrary notwithstanding, the Borrower may not select Eurodollar Rate Advances for any A Borrowing if the aggregate amount of such A Borrowing is less than $20,000,000. (c) Each Notice of A Borrowing shall be irrevocable and binding on the Borrower. In the case of any A Borrowing that the related Notice of A Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of A Borrowing for such A Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the A Advance to be made by such Lender as part of such A Borrowing when such A Advance, as a result of such failure, is not made on such date. (d) Unless the Agent shall have received notice from a Lender (i) by 12:00 Noon on the date of any A Borrowing in the case of any A Borrowing consisting of Base Rate Advances or (ii) by 12:00 Noon on the Business Day prior to the date of any A Borrowing consisting of Eurodollar Rate Advances that such Lender will not make available to the Agent such Lender's ratable portion of such A Borrowing, the Agent may assume that such Lender has made such portion available to the Agent on the date of such A Borrowing in accordance with subsection (a) of this Section 2.02 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Agent, such Lender and the Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to A Advances comprising such A Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Agent such corresponding amount, such amount so repaid shall 16 constitute such Lender's A Advance as part of such A Borrowing for purposes of this Agreement. (e) The failure of any Lender to make the A Advance to be made by it as part of any A Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its A Advance on the date of such A Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the A Advance to be made by such other Lender on the date of any A Borrowing. SECTION 2.03. The B Advances. (a) Each Lender severally agrees that the Borrower may make B Borrowings under this Section 2.03 from time to time on any Business Day during the period from the date hereof until the date occurring 15 days prior to the Termination Date in the manner set forth below; provided that, following the making of each B Borrowing, the aggregate amount of the Advances then outstanding shall not exceed an aggregate amount equal to (x) the Commitments of the Lenders at such time (computed without regard to any B Reduction) less (y) the aggregate LC Exposure at such time less (z) the aggregate outstanding principal amount of Swingline Loans at such time. (i) The Borrower may request a B Borrowing under this Section 2.03 by delivering to the Agent, by facsimile transmission, telex or cable, confirmed immediately in writing, a notice of a B Borrowing (a "Notice of B Borrowing"), in substantially the form of Exhibit B-2 hereto, specifying therein the date and aggregate amount of the proposed B Borrowing, the maturity date for repayment of each B Advance to be made as part of such B Borrowing (which maturity date may be (i) 14 to 180 days after the date of the B Borrowing in the case of fixed rate B Borrowings and (ii) 30 to 180 days after the date of the B Borrowing in the case of floating rate B Borrowings, but in either case may not be later than the Termination Date), the interest payment date or dates relating thereto, and any other terms to be applicable to such B Borrowing, not later than 10:00 A.M. (New York City time) (A) at least one (1) Business Day prior to the date of the proposed B Borrowing, if the Borrower shall specify in the Notice of B Borrowing that the rates of interest to be offered by the Lenders shall be fixed rates per annum and (B) at least four (4) Business Days prior to the date of the proposed B Borrowing, if the Borrower shall specify in the Notice of B Borrowing that the rates of interest to be offered by the Lenders shall be floating rates per annum. The Agent shall in turn promptly notify by telecopy each Lender of each request for a B Borrowing received by it from the Borrower by sending such Lender a copy of the related Notice of B Borrowing. (ii) Each Lender may, if, in its sole discretion, it elects to do so, irrevocably offer to make one or more B Advances to the Borrower as part of such proposed B Borrowing at a rate or rates of interest specified by such Lender in its sole discretion (but conforming to the Borrower's Notice of B Borrowing in respect thereof), by notifying the Agent (which shall give prompt notice thereof to 17 the Borrower), before 10:00 A.M. (New York City time) (A) on the date of such proposed B Borrowing, in the case of a Notice of B Borrowing delivered pursuant to clause (A) of paragraph (i) above and (B) three (3) Business Days before the date of such proposed B Borrowing, in the case of a Notice of B Borrowing delivered pursuant to clause (B) of paragraph (i) above, of the minimum amount and maximum amount of each B Advance which such Lender would be willing to make as part of such proposed B Borrowing (which amounts may exceed such Lender's Commitment), the rate or rates of interest therefor and such Lender's Applicable Lending Office with respect to such B Advance; provided that, if the Agent in its capacity as a Lender shall, in its sole discretion, elect to make any such offer, it shall notify the Borrower of such offer before 9:00 A.M. (New York City time) on the date on which notice of such election is to be given to the Agent by the other Lenders. Unless the Agent shall have received notice from a Lender before 10:00 A.M. in accordance with the immediately preceding sentence, the Agent and the Borrower may assume that such Lender has elected not to make such an offer pursuant to this Section 2.03(a)(ii). (iii) The Borrower shall (A) before 11:00 A.M. (New York City time) on the date of such proposed B Borrowing, in the case of a Notice of B Borrowing delivered pursuant to clause (A) of paragraph (i) above and (B) before 1:00 P.M. (New York City time) on the Business Day that is three (3) Business Days before the date of such proposed B Borrowing, in the case of a Notice of B Borrowing delivered pursuant to clause (B) of paragraph (i) above, either: (x) cancel such B Borrowing by giving the Agent notice to that effect; or (y) accept one or more of the offers made by any Lender or Lenders pursuant to paragraph (ii) above, in its sole discretion, by giving notice to the Agent of the amount of each B Advance (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to the Borrower by the Agent on behalf of such Lender for such B Advance pursuant to paragraph (ii) above) to be made by each Lender as part of such B Borrowing, and reject any remaining offers made by Lenders pursuant to paragraph (ii) above by giving the Agent notice to that effect. The acceptance of offers by the Borrower pursuant to this clause (B) shall be on the basis of ascending rates of interest contained in the offers made by Lenders pursuant to paragraph (ii) above; provided that, in the event that two or more of such offers contain the same rate of interest for a greater aggregate principal amount than the amount specified in such Notice of B Borrowing (less the aggregate principal amount of all such offers containing lower rates of interest that have been accepted by the Borrower pursuant to this clause (B)), the Borrower shall have sole discretion (subject to any minimum and maximum 18 amount specified in any such offer) to accept one or more of the offers at such rate of interest and to reject any remaining offers at such rate of interest. (iv) If the Borrower notifies the Agent that such B Borrowing is canceled pursuant to paragraph (iii)(x) above, the Agent shall give prompt notice thereof to the Lenders and such B Borrowing shall not be made. (v) If the Borrower accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (iii)(y) above, the Agent shall in turn promptly notify (A) each Lender that has made an offer as described in paragraph (ii) above, of the date and aggregate amount of such B Borrowing and whether or not any offer or offers made by such Lender pursuant to paragraph (ii) above have been accepted by the Borrower, (B) each Lender that is to make a B Advance as part of such B Borrowing, of the amount of each B Advance to be made by such Lender as part of such B Borrowing and (C) each Lender that is to make a B Advance as part of such B Borrowing, upon receipt, that the Agent has received forms of documents appearing to fulfill the applicable conditions set forth in Article III. Each Lender that is to make a B Advance as part of such B Borrowing shall, before 12:00 noon (New York City time) on the date of such B Borrowing specified in the notice received from the Agent pursuant to clause (A) of the preceding sentence or any later time when such Lender shall have received notice from the Agent pursuant to clause (C) of the preceding sentence, make available for the account of its Applicable Lending Office to the Agent at its address referred to in Section 8.02 such Lender's portion of such B Borrowing, in same day funds. Upon fulfillment of the applicable conditions set forth in Article III and after receipt by the Agent of such funds, the Agent will make such funds available to the Borrower at the Agent's aforesaid address. Promptly after each B Borrowing the Agent will notify each Lender of the amount of the B Borrowing, the consequent B Reduction, and the dates upon which such B Reduction commenced and will terminate. (vi) If the Borrower notifies the Agent that it accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (iii)(y) above, such notice of acceptance shall be irrevocable and binding on the Borrower. The Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in the related Notice of B Borrowing for such B Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the B Advance to be made by such Lender as part of such B Borrowing when such B Advance, as a result of such failure, is not made on such date. 19 (b) Each B Borrowing shall be in an aggregate amount not less than $15,000,000 or an integral multiple of $1,000,000 in excess thereof and, following the making of each B Borrowing, the Borrower shall be in compliance with the limitation set forth in the proviso to the first sentence of subsection (a) above. (c) Within the limits and on the conditions set forth in this Section 2.03, the Borrower may from time to time borrow under this Section 2.03, repay, or prepay pursuant to subsection (d) below, and reborrow under this Section 2.03; provided that a B Borrowing shall not be made within three (3) Business Days of the date of any other B Borrowing. (d) The Borrower shall repay to the Agent for the account of each Lender that has made a B Advance, or each other holder of a B Note, on the maturity date of each B Advance (such maturity date being that specified by the Borrower for repayment of such B Advance in the related Notice of B Borrowing delivered pursuant to subsection (a)(i) above and provided in the B Note evidencing such B Advance), the then unpaid principal amount of such B Advance. The Borrower shall have no right to prepay any principal amount of a B Advance unless, and then only on the terms, specified by the Borrower for such B Advance in the related Notice of B Borrowing delivered pursuant to subsection (a)(i) above and set forth in the B Note evidencing such B Advance. (e) The Borrower shall pay interest on the unpaid principal amount of each B Advance from the date of such B Advance to the date the principal amount of such B Advance is repaid in full, at the rate of interest for such B Advance specified by the Lender making such B Advance in its notice with respect thereto delivered pursuant to subsection (a)(ii) above, payable on the interest payment date or dates specified by the Borrower for such B Advance in the related Notice of B Borrowing delivered pursuant to subsection (a)(i) above, as provided in the B Note evidencing such B Advance. (f) The indebtedness of the Borrower resulting from each B Advance made to the Borrower as part of a B Borrowing shall be evidenced by a separate B Note of the Borrower payable to the order of the Lender making such B Advance. Upon the repayment in full of the indebtedness of Borrower resulting from such B Advance, the holder of the B Note evidencing such indebtedness shall return such B Note to the Borrower at its address specified pursuant to Section 8.02. SECTION 2.04. Swingline Loans. The Swingline Lender agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this Section 2.04 from time to time on any Business Day during the period from the date hereof until the Termination Date in amounts such that the aggregate principal amount of Swingline Loans at any one time outstanding shall not exceed its Swingline Commitment. Each loan under this Section 2.04 shall be in a principal amount of at least $1,000,000 or any larger multiple of $1,000,000. All Swingline Loans shall be made as Base Rate Advances. Within the foregoing limits, the Borrower may borrow under this 20 Section 2.04, repay pursuant to Section 2.08(b), or to the extent permitted by Section 2.13(c), prepay Swingline Loans and reborrow under this Section 2.04. (b) Notice of Swingline Borrowing. The Borrower shall give the Swingline Lender notice (a "Notice of Swingline Borrowing") not later than 1:00 P.M. (New York City time) on the date of each Swingline Borrowing, specifying (i) the date of such Swingline Borrowing, which shall be a Business Day, and (ii) the amount of such Borrowing. (c) Conversion of Swingline Loans to A Advances. The Swingline Lender, at any time in its sole and absolute discretion, may on behalf of the Borrower (which hereby irrevocably directs the Swingline Lender to so act on its behalf) notify each Lender (including the Swingline Lender) to make an A Advance to the Borrower in a principal amount equal to such Lender's Percentage of the amount of such Swingline Loan; provided, however that such notice shall be deemed to have automatically been given upon the occurrence of an Event of Default under Section 6.01(e). Upon notice from the Swingline Lender, each Lender (other than the Swingline Lender) will immediately transfer to the Swingline Lender, in immediately available funds, an amount equal to such Lender's Percentage of the amount of such Swingline Loan so repaid. Each Lender's obligation to transfer the amount of such A Advance to the Swingline Lender shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Lender or any other Person may have against the Swingline Lender, (ii) the occurrence or continuance of a Default or an Event of Default or the termination of the Commitments, (iii) any adverse change in the condition (financial or otherwise) of the Borrower or any other Person, (iv) any breach of this Agreement by the Borrower or any other Lender or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. SECTION 2.05. Letters of Credit. (a) Commitment to Issue Letters of Credit. Each LC Bank agrees, subject to the terms and conditions hereof, to issue Letters of Credit upon the request of the Borrower on a sight basis from time to time on any Business Day during the period from the date hereof until the Termination Date; provided that immediately after each such Letter of Credit is issued, the aggregate amount of the Letter of Credit Liabilities shall not exceed the Available LC Amount. Each Letter of Credit shall be issued in an amount equal to or greater than $100,000. Upon the date of issuance by an LC Bank of a Letter of Credit, the LC Bank shall be deemed, without further action by any party hereto, to have sold to each Lender, and each Lender shall be deemed, without further action by any party hereto, to have purchased from the LC Bank, a participation in such Letter of Credit and the related Letter of Credit Liabilities in proportion to its Percentage. The Borrower shall pay to the LC Bank issuance fees and other customary fees in the amounts and at the times as agreed between the Borrower and the LC Bank. 21 (b) Request for Issuance. The Borrower shall give the LC Bank at least three (3) Business Days' prior notice (effective upon receipt) of a request for the issuance of a Letter of Credit specifying the date each Letter of Credit is to be issued, and describing the proposed terms of such Letter of Credit and the nature of the transactions proposed to be supported thereby. Upon issuance of or amendments to a Standby Letter of Credit, the LC Bank shall promptly notify the Agent, and the Agent shall promptly notify each Lender of the contents thereof and of the amount of such Lender's participation in such Standby Letter of Credit. The issuance by the LC Bank of each Letter of Credit shall, in addition to the conditions precedent set forth in Article III, be subject to the conditions precedent that such Letter of Credit shall be in such form and contain such terms as shall be satisfactory to the LC Bank and that the Borrower shall have executed and delivered such other instruments and agreements relating to such Letter of Credit as the LC Bank shall have reasonably requested. No Standby Letter of Credit shall have an expiration date extending beyond three (3) days prior to the Termination Date. No Commercial Letter of Credit shall have an expiration date extending beyond 180 days from the issuance date nor have an expiration date less than 3 days prior to the Termination Date. In the event that the LC Bank issuing any Letter of Credit is other than Bankers Trust, such LC Bank will send by facsimile transmission to the Agent, promptly on the first Business Day of each week, the daily aggregate amount available for drawing under all Letters of Credit issued by such LC Bank for the previous week. The Agent shall deliver to each Lender, upon the end of each calendar month and upon each Letter of Credit fee payment, a report setting forth for such period the daily aggregate amounts available for drawing under all Letters of Credit issued by all LC Banks and outstanding during such period. (c) Reimbursement of Payments. Upon receipt from the beneficiary of any Letter of Credit of any demand for payment or other drawing under such Letter of Credit and finding such drawing in substantial compliance with the Letter of Credit terms, the LC Bank shall notify the Borrower as to the amount to be paid as a result of such demand or drawing and the respective payment date. If there are at such time amounts on deposit in the Holding Account, the Borrower shall notify the Agent thereof, and the Agent shall withdraw an amount equal to the amount to be paid as a result of such demand or drawing or, if less, the amount on deposit in the Holding Account, on the payment date and pay such amount to the applicable LC Bank. Unless the applicable LC Bank is reimbursed in full from amounts on deposit in the Holding Account, the Borrower shall reimburse the LC Bank in an amount equal to the amount of such drawing by 1:00 P.M. (New York City time) on the day on which such drawing is paid in immediately available funds. If the LC Bank is not reimbursed for the amount of such drawing as provided in the preceding sentence, the LC Bank shall notify the Agent, and the Agent shall notify each other Lender, thereof by 1:30 P.M. (New York City time) on the date such drawing is paid. If at any time the LC Bank shall make a payment to a beneficiary of a Letter of Credit in respect of a drawing or in respect of an acceptance created in connection with a drawing under such Letter of Credit and such drawing has not been paid by the Borrower, each Lender will pay to the Agent, for the account of the LC Bank, immediately upon the LC Bank's demand at any time during the period 22 commencing after such payment until reimbursement therefor in full by the Borrower, an amount equal to such Lender's Percentage multiplied by the amount of such payment, together with interest on such amount for each day from the date of the LC Bank's demand for such payment (or, if such demand is made after 3:00 P.M. (New York City time) on such date, from the next succeeding Business Day) to the date of payment by such Lender of such amount at a rate of interest per annum equal to the Federal Funds Rate for such period. (d) Reimbursement Obligations Unconditional. The Borrower shall be irrevocably and unconditionally obligated forthwith to reimburse the LC Bank for any amounts paid by the LC Bank upon any drawing under any Letter of Credit on the date of such payment by the LC Bank, without presentment, demand, protest or other formalities of any kind; provided that the Borrower shall not hereby be precluded from asserting any claim for direct (but not consequential) damages suffered by the Borrower to the extent, but only to the extent, caused by (i) the willful misconduct or gross negligence (as determined by a court of competent jurisdiction) of the LC Bank in determining whether a request presented under any Letter of Credit complied with the terms of such Letter of Credit or (ii) the LC Bank's failure to pay under any Letter of Credit after the presentation to it of a request strictly complying with the terms and conditions of the Letter of Credit. All such amounts paid by the LC Bank and remaining unpaid by the Borrower shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate applicable to Base Rate Advances for such day. The LC Bank will promptly pay to each Lender ratably in accordance with its Percentage all amounts received from the Borrower for application in payment, in whole or in part, of the Reimbursement Obligation in respect of any Letter of Credit, but only to the extent such Lender has made payment to the LC Bank in respect of such Letter of Credit pursuant to Section 2.05(c). (e) Indemnification. The Borrower hereby indemnifies and holds harmless each Lender and the Agent from and against any and all claims and damages, losses, liabilities, costs or expenses which such Lender or the Agent may incur (or which may be claimed against such Lender or the Agent by any Person whatsoever) by reason of or in connection with the execution and delivery or transfer of or payment or failure to pay under any Letter of Credit, including, without limitation, any claims, damages, losses, liabilities, costs or expenses which the LC Bank may incur by reason of or in connection with the failure of any other Lender to fulfill or comply with its obligations to the LC Bank hereunder (but nothing herein contained shall affect any rights the Borrower may have against such defaulting Lender); provided that the Borrower shall not be required to indemnify any Lender or the Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (i) the willful misconduct or gross negligence (as determined by a court of competent jurisdiction) of the LC Bank, such Lender or the Agent in determining whether a request presented under any Letter of Credit complied with the terms of such Letter of Credit or (ii) the LC Bank's failure to pay under any Letter of Credit after the presentation to it of a request strictly complying with the terms and conditions of the Letter of Credit. Nothing in this Section 23 2.05(e) is intended to limit the obligations of the Borrower under any other provision of this Agreement. (f) Limited Liability of the LC Bank. The Borrower assumes all risks of the acts or omissions of any beneficiary and any transferee of any Letter of Credit with respect to its use of such Letter of Credit. The Lenders, the LC Bank and their respective officers and directors shall not be liable or responsible for, and the obligations of each Lender to make payments, and of the Borrower to reimburse the LC Bank for payments, pursuant to this Section 2.05 shall not be excused by, any action or inaction of any Lender or the LC Bank related to any of: (i) the use which may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (ii) the validity, sufficiency or genuineness of documents presented under any Letter of Credit, or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged; (iii) payment by the LC Bank against presentation of documents to the LC Bank which do not strictly comply with the terms of any Letter of Credit, including failure of any documents to bear any reference or adequate reference to such Letter of Credit, absent such LC Bank's gross negligence or willful misconduct; or (iv) any other circumstances whatsoever in making or failing to make or notifying or failing to notify the LC Bank that it is required to make any payment under any Letter of Credit. Notwithstanding the foregoing, the Borrower shall have a claim against the LC Bank and the LC Bank shall be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential, damages suffered by the Borrower which were caused by (i) the LC Bank's willful misconduct or gross negligence (as determined by a court of competent jurisdiction) in determining whether documents presented under any Letter of Credit comply with the terms thereof or (ii) the LC Bank's willful failure to pay, or to notify any Lender that it is required to pay, under any Letter of Credit after the presentation to the LC Bank by any beneficiary (or a successor beneficiary to whom such Letter of Credit has been transferred in accordance with its terms) of documents strictly complying with the terms and conditions of such Letter of Credit. Subject to the preceding sentence, the LC Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary unless any beneficiary (or a successor beneficiary to whom such Letter of Credit has been transferred in accordance with its terms) or the Borrower shall have notified the LC Bank that such documents do not comply with the terms and conditions of such Letter of Credit. Each Lender shall, ratably in accordance with its Percentage, indemnify the LC Bank (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from the LC Bank's gross negligence or willful misconduct) that the LC Bank may suffer or incur in connection with this Agreement or any action taken or omitted by the LC Bank hereunder. (g) Letters of Credit Outside Facility. Nothing in this Agreement shall be construed as limiting the right of the Borrower to request, or of any Lender to issue, letters of credit for the account of the Borrower that are not "Letters of Credit" for 24 purposes of this Agreement. No request by the Borrower to any Lender for the issuance of a letter or credit shall be deemed a request for the issuance of a Letter of Credit under this Agreement unless (i) the Borrower's request for such letter of credit states in writing that such letter of credit, when issued, shall be a Letter of Credit under this Agreement, or (ii) such Lender conditions its agreement to issue such letter of credit, in writing, on the Borrower's agreement that such letter of credit constitute a Letter of Credit under this Agreement. (h) If after giving effect to any reduction of the Commitments pursuant to Section 2.07(a), the aggregate amount available to be drawn under all outstanding Letters of Credit exceeds the aggregate amount of the Commitments, the Borrower shall deposit into the Holding Account an amount in cash sufficient to cause the amount deposited in the Holding Account to equal such excess. At any time after such deposit is made, if an outstanding Letter of Credit expires or is reduced without the full amount thereof having been drawn, the Agent shall withdraw from the Holding Account and deliver to the Borrower an amount equal to the amount by which the amount on deposit in the Holding Account exceeds the aggregate amount by which the amount available to be drawn under outstanding Letters of Credit (after giving effect to such expiration or reduction) exceeds the aggregate amount of the Commitments. SECTION 2.06. Fees. (a) Facility Fee. The Borrower agrees to pay to the Agent for the account of each Lender a facility fee on the amount of such Lender's Commitment (whether used or unused and without giving effect to any B Reductions) from the Effective Date in the case of each Lender that is a signatory hereto or, in the case of an assignee Lender, from the effective date specified in the Assignment and Assumption Agreement pursuant to which it became a Lender or, in the case of a new Lender from the effective date specified in the agreement entered into by such new Lender pursuant to Section 2.07(b) pursuant to which it became a Lender, until the Termination Date, payable in arrears on the on the last Business Day of each March, June, September and December during the term of such Lender's Commitment, commencing December 31, 1997, and on the Termination Date, at a rate per annum equal to the Applicable Facility Fee Rate in effect from time to time. (b) Letter of Credit Commission. The Borrower agrees to pay to the Agent for the account of each Lender a Letter of Credit commission with respect to each Letter of Credit, computed for each day from and including the date of issuance of such Letter of Credit until the last day a drawing is available under such Letter of Credit, at a rate per annum equal to the Applicable Interest Rate Margin in effect from time to time on the undrawn amount of such Letter of Credit on such day. Such commission shall be payable quarterly in arrears on the last Business Day of each March, June, September and December during the term of each Letter of Credit, and on the Termination Date. (c) Agent's Fees. The Borrower shall pay to the Agent for its own account such fees, and at such times, as set forth in the letter, dated September 2, 1997, between the Borrower and the Agent. 25 (d) LC Bank Fees. The Borrower hereby agrees to pay directly to an LC Bank upon issuance of, drawing under, and/or amendment of, a Letter of Credit issued by it such amount as shall at the time of such issuance, drawing or amendment by the administrative charge which such LC Bank is customarily charging for issuances of, drawings under or amendments of, letter of credit issued by it. SECTION 2.07. Termination or Reduction of the Commitments or the Swingline Commitment; Voluntary Reduction; Increase in Aggregate Commitment. (a) The Borrower shall have the right, upon at least three (3) Business Days' notice to the Agent, to terminate in whole or reduce ratably in part the unused portions of (x) the respective Commitments of the Lenders, or (y) the Swingline Commitment; provided that the aggregate amount of the Commitments of the Lenders shall not be reduced to an amount that is less than the sum of the aggregate principal amount of the Advances and Swingline Loans then outstanding plus the aggregate outstanding amount of the Letter of Credit Liabilities, and the aggregate amount of the Swingline Commitment shall not be reduced to an amount that is less than the aggregate principal amount of the Swingline Loans then outstanding; and provided further that each partial reduction shall be in the aggregate amount of $25,000,000 ($1,000,000 in the case of the Swingline Commitment) or an integral multiple of $1,000,000 ($1,000,000 in the case of the Swingline Commitment) in excess thereof. (b) Increase in the Commitment. The Borrower may, at its option, at any time after the 90th day after the Effective Date, on a single occasion during each fiscal year, seek to increase the Commitment up to a maximum Commitment amount of $600,000,000 upon at least 30 days (but not more than 45 days) written notice to the Agent, which notice shall specify the amount of any such increase and shall be delivered at a time when (x) no Default or Event of Default has occurred and is continuing and (y) no previous reduction to the Commitment has been requested by the Borrower pursuant to Section 2.07(a). The Borrower shall, after giving such notice, offer the increase in the Commitment (A) (i) first on a pro-rata basis to the Lenders, which Lenders may in their individual sole discretion decline such offer, and (ii) then on a non pro-rata basis to Lenders and/or (B) to other banks or entities acceptable to the Agent and the Company, provided that the minimum final allocated Commitment of each such bank or other entity is equal to or in excess of $10,000,000. No increase in the Commitment shall become effective until the existing or new Lender extending such incremental commitment amount shall have delivered to the Agent a writing in form reasonably satisfactory to the Agent pursuant to which such existing Lender states the amount of its Commitment increase and any such new Lender states its Commitment amount and agrees to assume and accept the obligation and rights of a Lender hereunder. The Lenders (new or existing) shall accept an assignment from the existing Lenders of an interest in each then outstanding A Advance such that, after giving effect thereto, all A Advances are held ratably by the Lenders in proportion to their respective Commitments. The Company shall make any payments under Section 8.04(b) resulting from such assignments. The minimum amount by which the Commitments may be increased on any one occasion 26 under this Section 2.07(b) is $50,000,000, and the Commitments may not be increased to more than $600,000,000 pursuant to this Section 2.07(b). SECTION 2.08. Repayment of A Advances, B Advances and Swingline Loans. (a) The Borrower shall repay the principal amount of each A Advance made by each Lender in accordance with the A Note to the order of such Lender. (b) The Borrower shall repay the principal amount of each B Advance made by each Lender in accordance with the B Note to the order of such Lender evidencing such B Advance. (c) On the last Business Day of each calendar quarter, the Borrower shall repay all Swingline Loans in full and may not reborrow Swingline Loans until the next succeeding Business Day. SECTION 2.09. Interest on Advances and Swingline Loans. (a) Ordinary Interest on A Advances. The Borrower shall pay interest on the unpaid principal amount of each A Advance made by each Lender from the date of such A Advance until such principal amount shall be paid in full, at the following rates per annum: (i) Base Rate Advances. If such A Advance is a Base Rate Advance, a rate per annum equal at all times to, from the date hereof to the Termination Date, the Base Rate in effect from time to time, payable quarterly on the last Business Day of each March, June, September and December. (ii) Eurodollar Rate Advances. If such A Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such A Advance to the sum of (x) the Eurodollar Rate for such Interest Period for such A Advance plus (y) the Applicable Interest Rate Margin, payable on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Eurodollar Rate Advance shall be Converted or paid in full. (b) Interest on Swingline Loans. The Borrower shall pay interest on the unpaid principal amount of each Swingline Loan made by the Swingline Lender from the date of such Swingline Loan until such principal amount shall be paid in full at a rate per annum equal at all times to the Base Rate in effect from time to time, payable quarterly on the last Business Day of each March, June, September and December. (c) Default Interest. The Borrower shall pay interest on the unpaid principal amount of each Advance and Swingline Loan that is not paid when due and on the unpaid amount of all interest, fees and other amounts payable hereunder that is not 27 paid when due, payable on demand, at a rate per annum equal at all times to 2% per annum above the Base Rate in effect from time to time. SECTION 2.10. Additional Interest on Eurodollar Rate Advances. The Borrower shall pay to each Lender, so long as such Lender shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional interest on the unpaid principal amount of each Eurodollar Rate Advance of such Lender, from the date of such A Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the Eurodollar Rate for the Interest Period for such A Advance from (ii) the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of such Lender for such Interest Period, payable on each date on which interest is payable on such A Advance. Such additional interest shall be determined by such Lender and notified in writing to the Borrower through the Agent. SECTION 2.11. Interest Rate Determination. (a) Each Reference Bank agrees to furnish to the Agent timely information for the purpose of determining each Eurodollar Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Agent for the purpose of determining any such interest rate, the Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. (b) The Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Agent for purposes of Section 2.09(a)(i) or (ii), and the applicable rate, if any, furnished by each Reference Bank for the purpose of determining the applicable interest rate under Section 2.09(a)(ii). (c) If fewer than two Reference Banks furnish timely information to the Agent for determining the Eurodollar Rate for any Eurodollar Rate Advances, the Eurodollar Rate with respect to such Eurodollar Rate Advance shall be determined by the Agent to be the offered rate per annum at which deposits in dollars appear with respect to relevant Interest Period on the Dow Jones Market Service Page 3750 (or any successor page), or if such offered rate is not available, then the rate per annum at which deposits in dollars appear with respect to such Interest Period on the Reuters Screen LIBOR Page (or any successor page) in each case as of 11:00 a.m. (London time), two Business Days prior to the beginning of such Interest Period or in the event that the foregoing offered rates are not available then: (i) the Agent shall forthwith notify the Borrower and the Lenders that the interest rate cannot be determined for such Eurodollar Rate Advances, (ii) each such Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if 28 such Advance is then a Base Rate Advance, will continue as a Base Rate Advance) and (iii) the obligation of the Lenders to make, or to Convert A Advances into, Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrower and the Lenders that two or more Reference Banks have furnished timely information to the Agent for the purpose of determining the Eurodollar Rate. (d) If any Reference Bank shall fail to furnish timely information to the Agent pursuant to this Section 2.09 the Borrower may, with the consent of the Agent (which consent shall not be unreasonably withheld), appoint another Lender as a replacement for such Reference Bank. (e) If, with respect to any Eurodollar Rate Advances, the Majority Lenders notify the Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Majority Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, the Agent shall forthwith so notify the Borrower and the Lenders, whereupon (i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to Convert A Advances into, Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. (f) If the Borrower shall fail to select a new Interest Period for any outstanding Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Agent will forthwith so notify the Borrower and the Lenders and such Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances. (g) On the date on which the aggregate unpaid principal amount of A Advances comprising any A Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $20,000,000, such A Advances shall, if they are Eurodollar Rate Advances, automatically Convert into Base Rate Advances, and on and after such date the right of the Borrower to Convert such A Advances into Eurodollar Rate Advances shall terminate; provided, however that, if and so long as each such A Advance shall be of the same Type and have the same Interest Period as A Advances comprising another A Borrowing or other A Borrowings, and the aggregate unpaid principal amount of all such A Advances shall equal or exceed $20,000,000, the Borrower shall have the right to continue all such A Advances as, or to Convert all such A Advances into, Advances of such Type having such Interest Period. 29 SECTION 2.12. Voluntary Conversion of A Advances. The Borrower may on any Business Day, upon notice given to the Agent not later than 11:00 A. M. (New York City time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.11 and 2.15, Convert all A Advances of one Type comprising the same A Borrowing into A Advances of the other Type; provided, however that any Conversion of any Eurodollar Rate Advances into Base Rate Advances shall be made on, and only on, the last day of an Interest Period for such Eurodollar Rate Advances and any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less than $20,000,000; and provided further, however, that the Borrower shall not convert any Base Rate Advances into Eurodollar Rate Advances if a Default has occurred and is continuing. Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the A Advances to be Converted and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for each such A Advance. Each notice of Conversion shall be irrevocable and binding, on the Borrower. SECTION 2.13. Prepayments of A Advances and Swingline Loans. (a) The Borrower shall have no right to prepay any principal amount of any A Advances other than as provided in subsection (b) below, or any principal amount of any Swingline Loans other than as provided in subsection (c) below. (b) The Borrower may, upon at least one (1) Business Day's notice in the case of Base Rate Advances, and three (3) Business Days' notice in the case of Eurodollar Rate Advances to the Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the outstanding principal amounts of the A Advances comprising part of the same A Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount not less than $1,000,000 or an integral multiple thereof and (y) in the case of any such prepayment of a Eurodollar Rate Advance, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 8.04(b). (c) The Borrower may, upon notice to the Swingline Lender, prepay any Swingline Loan in whole by paying the principal amount thereof. SECTION 2.14. Increased Costs. (a) If, due to either (i) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements included in the Eurodollar Rate Reserve Percentage) in or in the interpretation of any law, regulation, rule or guideline promulgated or made after the date this Agreement is executed and delivered by the Borrower or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law) promulgated or made after the date this Agreement is executed and delivered by the Borrower, there shall be any increase in the cost to any 30 Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Advances, then the Borrower shall from time to time, upon written demand by such Lender (with a copy of such written demand to the Agent), pay to the Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost; provided that the Borrower shall not be obligated to pay any such additional amounts that are attributable to the period (the "Excluded Period") ending 90 days prior to the Borrower's receipt of such written notice; provided further, however, that to the extent such additional amounts accrue during the Excluded Period because of the retroactive effect of the applicable law, rule, regulation, guideline or request promulgated during the 90 day period prior to the Borrower's receipt of such written notice, the limitation set forth in the foregoing proviso shall not apply. A certificate, made in good faith and in reasonable detail, as to the amount of such increased cost, submitted to the Borrower and the Agent by such Lender, shall, except for demonstrable or calculation error, be conclusive and binding for all purposes. (b) If any Lender determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) promulgated or made after the date this Agreement is executed and delivered by the Borrower affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type, then, within 30 days after written notice and demand from such Lender (with a copy of such demand to the Agent), the Borrower shall immediately pay to the Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder; provided that the Borrower shall not be obligated to pay any such additional amounts that are attributable to the period (the "Excluded Period") ending 90 days prior to the Borrower's receipt of such written notice; provided further, however, that to the extent such additional amounts accrue during the Excluded Period because of the retroactive effect of the applicable law, rule, regulation, guideline or request promulgated during the 90 day period prior to the Borrower's receipt of such written notice, the limitation set forth in the foregoing proviso shall not apply. A certificate, made in good faith and in reasonable detail, as to such amounts submitted to the Borrower and the Agent by such Lender shall, except for demonstrable or calculation error, be conclusive and binding for all purposes. (c) Any Lender claiming any additional amounts payable pursuant to this Section 2.14 shall use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its lending office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. 31 SECTION 2.15. Illegality. Notwithstanding any other provision of this Agreement, if any Lender shall notify the Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for any Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances hereunder, (i) the obligation of such Lender to make, or to Convert A Advances into, Eurodollar Rate Advances shall be suspended until such Lender shall notify the Borrower and the Agent that the circumstances causing such suspension no longer exist and (ii) the Borrower shall, on the last day of the Interest Period then applicable thereto or, if it is unlawful for such Lender to maintain such Eurodollar Advances for the balance of any such Interest Period, on the last day on which the Borrower has been notified by such Lender that such Eurodollar Advances may be lawfully maintained, Convert all Eurodollar Rate Advances of such Lender then outstanding into Base Rate Advances in accordance with Section 2.12. SECTION 2.16. Payments and Computations. (a) The Borrower shall make each payment hereunder and under the Notes not later than 12:00 Noon (New York City time) on the day when due in U.S. dollars to the Agent at its address referred to in Section 8.02 in same day funds. The Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or facility fees ratably (other than amounts payable pursuant to Section 2.03, 2.10, 2.14. 2.18 or 8.04(b)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(c), from and after the effective date specified in such Assignment and Acceptance, the Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) All computations of interest based on the Base Rate shall be made by the Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate or the Federal Funds Rate (for all purposes other than the calculation of the Base Rate) and of facility fees shall be made by the Agent, and all computations of interest pursuant to Section 2.10 shall be made by a Lender, on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or facility fees are payable. Each determination by the Agent (or, in the case of Section 2.10, by a Lender) of an interest rate hereunder shall be conclusive and binding for all purposes, absent calculation or demonstrable error. 32 (c) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or facility fee, as the case may be; provided, however that if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (d) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent that the Borrower shall not have so made such payment in full to the Agent, each Lender shall repay to the Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Agent, at the Federal Funds Rate. SECTION 2.17. Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the A Advances owing to it (other than pursuant to Section 2.10, 2.14, 2.18 or 8.04(b)) in excess of its ratable share of payments on account of the A Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the A Advances owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them, provided, however that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.17 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. SECTION 2.18. Taxes. (a) Any and all payments by the Borrower hereunder or under the Notes shall be made, in accordance with Section 2.16, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions. charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Agent, net income taxes that are imposed by the United States and franchise taxes and net income taxes that are imposed on such Lender or the 33 Agent by the state or foreign jurisdiction under the laws of which such Lender or the Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Lender, franchise taxes and net income taxes that are imposed on such Lender by the state or foreign jurisdiction of such Lender's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.18) such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "Other Taxes"). (c) The Borrower will indemnify each Lender and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.18) paid by such Lender or the Agent (as the case may be) and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender or the Agent (as the case may be) makes written demand therefor. (d) Each Lender shall, at the time of any written demand for indemnification as set forth in subsection (c) above, provide to the Borrower a receipt for, or other evidence of the payment of, Taxes or Other Taxes to be indemnified under this Section 2.18. (e) Within 30 days after the date of any payment of Taxes, the Borrower will furnish to the Agent, at its address referred to in Section 8.02, appropriate evidence of payment thereof. (f) For purposes of this Section 2.18, the terms "United States" and "United States person" shall have the meanings specified in Section 7701 of the Internal Revenue Code of 1986, as amended from time to time. (g) Each Lender organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank, and on the date of the Assignment and Acceptance pursuant to 34 which it became a Lender in the case of each other Lender, and from time to time thereafter if requested in writing by the Borrower or the Agent (but only so long thereafter as such Lender remains lawfully able to do so), provide the Agent and the Borrower with Internal Revenue Service form 1001 or 4224, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that such Lender is exempt from or entitled to a reduced rate of United States withholding tax on payments of interest pursuant to this Agreement or the Notes. If the form provided by a Lender at the time such Lender first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender provides the appropriate form certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such form; provided, however, that, if at the date of the Assignment and Acceptance pursuant to which a Lender assignee becomes a party to this Agreement, the Lender assignor was entitled to payments under subsection (a) in respect of United States withholding tax with respect to interest paid at such date, then, to the extent such tax results in liability for such payments, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States interest withholding tax, if any, applicable with respect to the Lender assignee on such date. (h) For any period with respect to which a Lender has failed to provide the Borrower with the appropriate form described in subsection (g) (other than if such failure is due to a change in law occurring subsequent to the date on which a form originally was required to be provided, or if such form otherwise is not required under subsection (g)), such Lender shall not be entitled to indemnification under subsection (a) or (c) with respect to Taxes imposed by the United States; provided, however, that, should a Lender become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes. (i) Any Lender claiming any additional amounts payable pursuant to this Section 2.18 shall use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its lending office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. (j) In the event the Borrower is required pursuant to this Section 2.18 to pay any amount to any Lender or the Agent or on the behalf of any of them to any taxing authority, such Lender shall, if no Default has occurred and is continuing, upon the request of the Borrower delivered to such Lender and the Agent, assign, pursuant to and in accordance with the provisions of Section 8.07, all of its rights and obligations under this Agreement and under the Notes to an Eligible Assignee selected by the Borrower in consideration for (i) the payment by such assignee to the assigning Lender of the principal of, and interest accrued and unpaid to the date of such assignment on, the Note 35 or Notes of such Lender, (ii) the payment by the Borrower to the assigning Lender of any and all other amounts owing to such Lender under any provision of this Agreement accrued and unpaid to the date of such assignment and (iii) the Borrower's release of the assigning Lender from any further obligation or liability under this Agreement. The processing and recordation fee required under Section 8.07(a) for such assignment shall be paid by the Borrower. Notwithstanding anything to the contrary in this Section 2.18(j), in no event shall the replacement of any Lender result in a decrease or reallocation of the aggregate Commitments without the written consent of the Majority Lenders. SECTION 2.19. Use of Proceeds. The proceeds of the Advances, Swingline Loans and Letters of Credit shall be available, and the Borrower agrees that it will use such proceeds, solely for the general corporate purposes of the Borrower and its Subsidiaries, including, without limitation, acquisitions that have been approved by the board of directors of the acquired entity and stock repurchases. SECTION 2.20. Termination Date Extensions. At any time after the second anniversary of the Effective Date, the Borrower may make a written request to the Agent, who shall forward a copy of each such request to each of the Lenders, that the Termination Date then in effect be extended to the date which is one year after such existing Termination Date; provided, however, that the Borrower shall not be permitted to obtain more than three extensions pursuant to this Section 2.20. Such request shall be accompanied by a certificate of a Financial Officer of the Borrower stating that no Default or Event of Default has occurred and is continuing. If, by the date (a "Response Date") which is 30 days after the date of such request, Lenders holding at least 70% of the Commitments then outstanding agree thereto in writing, the Termination Date of each Lender then consenting, or that thereafter consents, to such extension (each, a "Continuing Lender") shall be automatically extended to the first anniversary of the then existing Termination Date. In the event that the Borrower has not obtained agreement to the requested extension from the requisite percentage of Lenders to permit an extension by the Response Date, the Borrower may extend the deadline for obtaining such percentage to the thirtieth day following such Response Date in order to take such actions, including those contemplated by Section 2.21, with respect to any Lender that has not agreed to such extension (each, a "Non-Continuing Lender"), as the Borrower deems appropriate in order to obtain agreement to such extension from the requisite percentage of Lenders. If the Borrower obtains agreement from the requisite percentage of the Lenders during such thirty day period, the Termination Date shall be extended as to the Continuing Lenders as provided in the second preceding sentence. The Agent shall notify the Borrower and each Lender of the effectiveness of any such extension. No Lender shall be obligated to agree to any extension pursuant to this Section 2.20, and the extension of the Termination Date as to any Lender shall be in its sole discretion. The Termination Date shall not be extended pursuant to this Section 2.20 for any Lender that is a Non-Continuing Lender. 36 SECTION 2.21. Replacement of Lenders. Any Lender claiming any additional amounts payable pursuant to Section 2.14, invoking the provisions of Section 2.15 or becoming a Non-Continuing Lender shall, if no Default has occurred and is continuing, upon the request of the Borrower delivered to such Lender and the Agent, assign, pursuant to and in accordance with the provisions of Section 8.07, all of its rights and obligations under this Agreement and under the Notes to an Eligible Assignee selected by the Borrower in consideration for (i) the payment by such assignee to the assigning Lender of the principal of, and interest accrued and unpaid to the date of such assignment on, the Note or Notes of such Lender, (ii) the payment by the Borrower to the assigning Lender of any and all other amounts owing to such Lender under any provision of this Agreement accrued and unpaid to the date of such assignment and (iii) the Borrower's release of the assigning Lender from any further obligation or liability under this Agreement. The processing and recordation fee required under Section 8.07(a) for such assignment shall be paid by the Borrower. Notwithstanding anything to the contrary in this Section 2.21, in no event shall the replacement of any Lender result in a decrease or reallocation of the aggregate Commitments without the written consent of the Majority Lenders. ARTICLE III CONDITIONS OF LENDING SECTION 3.01. Conditions Precedent to the Effectiveness of Sections 2.01, 2.03, 2.04 and 2.05. The effectiveness of Sections 2.01, 2.03, 2.04 and 2.05 is subject to the following conditions precedent: (a) This Agreement (including all schedules, exhibits, certificates and opinions delivered pursuant hereto) shall be in full force and effect and shall not have been terminated. (b) There shall have occurred no material adverse change in the condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries, taken as a whole, since February 28, 1997. (c) There shall exist no action, suit, investigation, litigation or proceeding affecting the Borrower or any of its Subsidiaries pending or threatened before any court, governmental agency or arbitrator that (i) could reasonably be expected to result in a material adverse change in the condition (financial or otherwise) or results of operations or prospects of the Borrower and its Subsidiaries, taken as a whole, other than the matters described on Schedule III hereto (the "Disclosed Litigation") or (ii) purports to affect the legality, validity or enforceability of this Agreement or any Note or the consummation of the transactions contemplated hereby, and there shall have been no adverse change in 37 the status, or financial effect on the Borrower or any of its Subsidiaries, of the Disclosed Litigation from that described on Schedule III hereto. (d) All governmental and third party consents and approvals necessary in connection with the transactions contemplated hereby shall have been obtained (without the imposition of any conditions that are not acceptable to the Lenders) and shall remain in effect, and no law or regulation shall be applicable that restrains, prevents or imposes materially adverse conditions upon the transactions contemplated hereby. (e) The Borrower shall have notified each Lender and the Agent in writing as to the proposed Effective Date. (f) The Borrower shall have paid all accrued fees and expenses of the Agent that have been billed (including the accrued fees and expenses of counsel to the Agent). (g) The Agent shall have received on or before the Effective Date the following, each dated such date, in form and substance satisfactory to the Agent and (except for the Notes) in sufficient copies for each Lender: (i) the A Notes payable to the order of the Lenders, respectively, (ii) certified copies of the resolutions of the Board of Directors of the Borrower approving this Agreement and the Notes, and of all documents evidencing other necessary corporate action and government approvals, if any, with respect to this Agreement and the Notes, (iii) a certificate of the Secretary or an Assistant Secretary of the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign this Agreement and the Notes and the other documents to be delivered hereunder, (iv) a copy of a certificate of the Secretary of State of the State of Delaware (as of a date reasonably near the Effective Date) that (a) attached thereto is a true and correct copy of the Borrower's charter and each amendment thereto, (b) such amendments are the only amendments to the Borrower's charter on file in his office, (c) the Borrower has paid all franchise taxes to the date of such certificate and (d) the Borrower is duly incorporated and in good standing under the laws of Delaware, (v) a certificate of the Borrower, signed by its President or a Vice President and its Secretary or any Assistant Secretary, dated the Effective Date, certifying (a) as to the absence of any amendments to the charter of the Borrower since the date of the Secretary of State's certificate 38 from the State of Delaware, (b) that attached is a true and correct copy of the by-laws of the Borrower as in effect on the Effective Date, (c) as to the due incorporation and good standing of the Borrower as a corporation organized under the laws of the state of Delaware, and the absence of any proceeding for the dissolution or liquidation of the Borrower, (d) as to the truth and correctness of the representations and warranties contained in Section 4.01 of this Agreement as though made on and as of the Effective Date and (e) as to the absence of any event occurring and continuing, or resulting from the effectiveness of Sections 2.01, 2.03, 2.04 and 2.05, if any, that constitutes a Default, (vi) a favorable opinion of Dorsey & Whitney, LLP, special counsel for the Borrower, substantially in the form of Exhibit D hereto and as to such other matters as any Lender through the Agent may reasonably request, (vii) a favorable opinion of Teresa H. Johnson, Associate General Counsel of the Borrower, substantially in the form of Exhibit E hereto and as to such other matters as any Lender through the Agent may reasonably request, (viii) evidence of the termination of the commitments under the Current Supervalu Credit Agreement, and payment of all amounts owing thereunder, and (ix) such other approvals, opinions or documents as any Lender, through the Agent, may reasonably request. SECTION 3.02. Conditions Precedent to Each A Borrowing, Swingline Borrowing and Issuance of a Letter of Credit. The obligation of each Lender to make an A Advance on the occasion of each A Borrowing (including the initial A Borrowing but other than an A Advance pursuant to Section 2.04(c)) resulting in an increase in the aggregate amount of outstanding A Advances, the obligation of each LC Bank to issue a Letter of Credit on the occasion of a request therefor by the Borrower (other than an extension of a maturing Letter of Credit that provides for a drawing thereunder in the absence of such extension), and the obligation of the Swingline Lender to make a Swingline Loan on the occasion of each Swingline Borrowing shall be subject to the further conditions precedent that on the date of such A Borrowing, the issuance of such Letter of Credit or such Swingline Borrowing, as the case may be, the following statements shall be true (and each of the giving of the applicable Notice of A Borrowing, request for issuance of Letter of Credit or Notice of Swingline Borrowing, as the case may be, and the acceptance by the Borrower of the proceeds of such A Borrowing or Swingline Borrowing or benefits of the issuance of such Letter of Credit, as the case may be, shall constitute a representation and warranty by the Borrower that on the date of such A Borrowing, the issuance of such Letter of Credit or such Swingline Borrowing, as the case may be, such statements are true): 39 (i) the representations and warranties contained in Section 4.01 (excluding that contained in the last sentence of subsection (e) thereof) are correct on and as of the date of such A Borrowing, the issuance of such Letter of Credit or such Swingline Borrowing, as the case may be before and after giving effect to such A Borrowing, the issuance of such Letter of Credit or such Swingline Borrowing, as the case may be, and to the application of the proceeds therefrom, as though made on and as of such date, and (ii) no event has occurred and is continuing, or would result from such A Borrowing, the issuance of such Letter of Credit or such Swingline Borrowing, as the case may be, or from the application of the proceeds therefrom, which constitutes a Default. SECTION 3.03. Conditions Precedent to Each B Borrowing. The obligation of each Lender that is to make a B Advance on the occasion of a B Borrowing (including the initial B Borrowing) to make such B Advance as part of such B Borrowing is subject to the conditions precedent that (i) the Agent shall have received the written confirmatory Notice of B Borrowing with respect thereto, (ii) (x) in the case of any B Borrowing (except as otherwise set forth in subclause (y) below), on or before the date of such B Borrowing, but prior to such B Borrowing, and (y) in the case of same day, fixed rate B Borrowings, promptly after any such B Borrowing, the Agent shall have received a B Note payable to the order of such Lender for each of the one or more B Advances to be made by such Lender as part of such B Borrowing, in a principal amount equal to the principal amount of the B Advance to be evidenced thereby and otherwise on such terms as were agreed to for such B Advance in accordance with Section 2.03 and (iii) on the date of such B Borrowing the following statements shall be true (and each of the giving of the applicable Notice of B Borrowing and the acceptance by the Borrower of the proceeds of such B Borrowing shall constitute a representation and warranty by the Borrower that on the date of such B Borrowing such statements are true): (a) the representations and warranties contained in Section 4.01 (excluding that contained in the last sentence of subsection (e) thereof) are correct on and as of the date of such B Borrowing, before and after giving effect to such B Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, (b) no event has occurred and is continuing, or would result from such B Borrowing or from the application of the proceeds therefrom, which constitutes a Default and (c) no event has occurred and no circumstance exists as a result of which the information concerning the Borrower that has been provided to the Agent and each Lender by the Borrower in connection herewith would include an untrue statement of a material fact or omit to state any material fact or any fact 40 necessary, to make the statements contained therein, in the light of the circumstances under which they were made, not misleading. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. (b) The execution, delivery and performance by the Borrower of this Agreement and the Notes, and the consummation of the transactions contemplated hereunder, are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not (a) contravene the Borrower's charter or by-laws, (b) violate any law, rule, regulation, order, writ, judgment, determination or award binding on or affecting the Borrower or (c) conflict with or result in the breach of, or constitute a default under, any agreement or instrument binding on or affecting the Borrower. (c) This Agreement has been, and each of the Notes when delivered hereunder will have been, duly executed and delivered by the Borrower. This Agreement is, and the Notes when delivered hereunder will be, legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms. (d) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body, or any third party that is a party to any agreement or instrument binding on the Borrower is required for the due execution, delivery or performance by the Borrower of this Agreement or the Notes, or for the consummation of the transactions contemplated by this Agreement. (e) The Consolidated balance sheet of the Borrower and its Subsidiaries as at February 28, 1997, and the related statements of income and retained earnings of the Borrower and its Subsidiaries for the fiscal year then ended, accompanied by an opinion of DeLoitte & Touche, LLP, independent public accountants, and the Consolidated balance sheet of the Borrower and its Subsidiaries as at June 14, 1997, and the related statements of income and retained earnings of the Borrower and its Subsidiaries for the fiscal quarter then ended, duly certified by a Financial Officer of the Borrower, copies of which have been furnished to each Lender, fairly present, subject, in the case of said balance sheet as at June 14, 1997, and said statements of income and retained earnings for 41 the fiscal quarter then ended, to year-end audit adjustments, the Consolidated financial condition of the Borrower and its Subsidiaries as at such dates and the Consolidated results of the operations of the Borrower and its Subsidiaries for the periods ended on such dates, all in accordance with generally accepted accounting principles consistently applied. Since February 28, 1997, there has been no material adverse change in such condition or operations. (f) Except as set forth on Schedule III, there is no pending or threatened action, suit, investigation, litigation or proceeding, including, without limitation, any Environmental Action, affecting the Borrower or any of its Subsidiaries before any court, governmental agency or arbitrator, that (a) is likely to result in a material adverse change in the condition (financial or otherwise) or results of operations or prospects of the Borrower and its Subsidiaries, taken as a whole, or (b) purports to affect the legality, validity or enforceability of this Agreement or any Note or the consummation of the transactions contemplated hereby. (g) (i) No information, exhibit or report furnished by or on behalf of the Borrower to the Agent or any Lender in connection with the negotiation of the Loan Documents or pursuant to the terms of the Loan Documents contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein not misleading in light of the circumstances under which such statements were made; and (ii) all financial projections that have been provided by or on behalf of the Borrower to the Agent or any Lender were prepared in good faith based on reasonable assumptions (it being understood that such projections are subject to significant uncertainties and contingencies beyond the Borrower's control, and that no assurance can be given that the projections will be realized). (h) Following application of the proceeds of each Advance, Swingline Loan and Letter of Credit, not more than 25 percent of the value of the assets (either of the Borrower only or of the Borrower and its Subsidiaries on a Consolidated basis) subject to the provisions of Section 5.02(a) or Section 5.02(c) or subject to any restriction contained in any agreement or instrument between the Borrower and any Lender or any Affiliate of any Lender relating to Debt and within the scope of Section 6.01(d) will be margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System). (i) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan of the Borrower or any of its ERISA Affiliates that has resulted in or is reasonably likely to result in a liability of the Borrower or any of its ERISA Affiliates in excess of $25,000,000 in any one case or $50,000,000 in the aggregate. 42 (j) Schedule B (Actuarial Information) to the 1996 annual report (Form 5500 Series) for each Plan of the Borrower or any of its ERISA Affiliates, copies of which have been filed with the Internal Revenue Service and furnished to the Lenders, is complete and accurate and fairly presents the funding status of such Plan, and since the date of such Schedule B there has been no material adverse change in such funding status. (k) Neither the Borrower nor any of its ERISA Affiliates has incurred or is reasonably expected to incur any Withdrawal Liability to any Multiemployer Plan in excess of $25,000,000 in any one case or $50,000,000 in the aggregate. (l) Neither the Borrower nor any of its ERISA Affiliates has been notified by the sponsor of a Multiemployer Plan of the Borrower or any of its ERISA Affiliates that such Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, and no such Multiemployer Plan is reasonably expected to be in reorganization or to be terminated, within the meaning of Title IV of ERISA, if as a result thereof the Borrower or any of its ERISA Affiliates would incur or would reasonably be expected to incur, any liability in excess of $25,000,000 in any one case or $50,000,000 in the aggregate. (m) The aggregate annualized amount paid (including, without limitation, the cost of insurance premiums) with respect to post-retirement benefits under Welfare Plans for which the Borrower and its Subsidiaries are liable does not exceed $8,000,000. (n) Each of the Borrower and its Subsidiaries has filed or caused to be filed all tax returns which are required to be filed, and all taxes related to such returns and any assessments made against it or any of its respective properties and all other taxes, fees or other charges imposed on it or any of its respective properties by any governmental authority (other than those the amount or validity of which is contested in good faith by appropriate proceedings and with respect to which reserves in conformity with generally, accepted accounting principles have been provided on the books of the Borrower or its Subsidiaries as the case may be) have been paid, except to the extent the failure to make such filings or payments would not have a material adverse effect on the condition (financial or otherwise) or results of operations or prospects of the Borrower and its Subsidiaries, taken as a whole. (o) Neither the Borrower nor any of its Subsidiaries is an "investment company", or an "affiliated person" of, or "promotor" or "principal underwriter" for, an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended. 43 (p) The operations and properties of the Borrower and each of its Subsidiaries comply in all material respects with all Environmental Laws, all necessary Environmental Permits have been obtained and are in effect for the operations and properties of the Borrower and its Subsidiaries and the Borrower and its Subsidiaries are in compliance in all material respects with all such Environmental Permits, except to the extent that any such non-compliance or failure to obtain any necessary permits could not reasonably be expected to result in a material adverse change in the condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries, taken as a whole. No circumstances exist that could be reasonably likely to (i) form the basis of an Environmental Action against the Borrower or any of its Subsidiaries or any of their respective properties that could have a material adverse effect on the condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries, taken as a whole, or (ii) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law that could have a material adverse effect on the condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries, taken as a whole. ARTICLE V COVENANTS OF THE BORROWER SECTION 5.01. Affirmative Covenants. So long as any Note shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will, unless the Majority Lenders shall otherwise consent in writing: (a) Compliance with Laws, Payment of Taxes, Etc. Comply, and cause each of its Subsidiaries to comply, in all material respects, with all material applicable laws (including, without limitation, ERISA), rules, regulations and orders, such compliance to include, without limitation, paying and discharging before the same become delinquent all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent contested in good faith and for which appropriate reserves have been made in accordance with generally accepted accounting principles. (b) Preservation of Corporate Existence, Etc. Preserve and maintain its corporate existence, rights (charter and statutory) and franchises; provided, however, that the Borrower may consummate any merger or consolidation permitted under Section 5.02(b), and provided further that the Borrower shall not be required to preserve any right or franchise if the Borrower shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Borrower and that the loss thereof is not disadvantageous in any material respect to the Borrower. 44 (c) Keeping of Books. Keep, and cause each Subsidiary to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each Subsidiary in order to permit the Borrower to prepare Consolidated financial statements of the Borrower in accordance with generally accepted accounting principles in effect from time to time. (d) Leverage Ratio. Maintain at all times a ratio of Consolidated Debt to Total Capital of not more than the amount set forth below during each period set forth below: Period Ratio ----- From the date of this Agreement - 2/28/98 .65:1 3/1/98 - 2/28/99 .64:1 3/1/99 - and thereafter .63:1 (e) Reporting Requirements. Furnish to each Lender: (i) (x) as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Borrower, the Consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such quarter and Consolidated statements of income and retained earnings of the Borrower and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, duly certified by a Financial Officer of the Borrower as having been prepared in accordance with generally accepted accounting principles; (y) as soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the Consolidated annual report for such year for the Borrower and its Subsidiaries, containing Consolidated financial statements for such year, certified in a manner acceptable to the Majority Lenders by DeLoitte & Touche or other nationally recognized independent public accountants; and (z) together with each delivery of financial statements required by clauses (x) and (y) above, a certificate of a Financial Officer (A) stating that the signer has reviewed or caused to be reviewed under his or her supervision the terms of this Agreement and the Notes and the transactions and condition of the Borrower and its Subsidiaries during the accounting period covered by such financial statements and that such review has not disclosed the existence as at the date of such certificate of any condition or 45 event that constitutes a Default, and (B) setting forth (except to the extent specifically set forth in such financial statements) information in reasonable detail necessary to demonstrate the Borrower's compliance as at the end of such accounting period with Section 5.01(d)(including, but not limited to, a description of and amounts comprising the elements of Consolidated Debt, each determined in accordance with generally accepted accounting principles); (ii) as soon as possible and in any event within five (5) days after any Financial Officer of the Borrower has knowledge of the occurrence of each Default continuing on the date of such statement, a statement of a Financial Officer of the Borrower setting forth the details of such Default and the action which the Borrower has taken and proposes to take with respect thereto; (iii) promptly after the sending or filing thereof, copies of all reports which the Borrower sends to its shareholders, and copies of all reports and registration statements which the Borrower or any Subsidiary files with the Securities and Exchange Commission or any national securities exchange; (iv) promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Plan of the Borrower or any of its ERISA Affiliates, provided that this clause (iv) shall apply only to the extent that the total "current liability" indicated on any such Schedule B exceeds $8,000,000; (v) promptly and in any event within 15 Business Days after the Borrower or any of its ERISA Affiliates knows or has reason to know that any ERISA Event has occurred, a statement of a Financial Officer of the Borrower describing such ERISA Event and the action, if any, which the Borrower or such ERISA Affiliate proposes to take with respect thereto; (vi) promptly and in any event within five Business Days after receipt thereof by the Borrower or any of its ERISA Affiliates, copies of each notice from the PBGC stating its intention to terminate any Plan of the Borrower or any of its ERISA Affiliates or to have a trustee appointed to administer any Plan of the Borrower or any of its ERISA Affiliates; (vii) promptly after commencement thereof, notice of all actions and proceedings before any court, governmental agency or arbitrator affecting the Borrower or any of its Subsidiaries of the type described in Section 4.01(f); and 46 (viii) such other information respecting the condition or operations, financial or otherwise, of the Borrower or any of its Subsidiaries as any Lender through the Agent may from time to time reasonably request. (f) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates. (g) Maintenance of Properties, Etc. Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted; provided however that neither the Borrower nor any of its Subsidiaries shall be required to maintain or preserve any properties if the Borrower determines, in its reasonable business judgment, that the maintenance and preservation thereof is no longer desirable in the conduct of the business of the Borrower or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to the Borrower or such Subsidiary. SECTION 5.02. Negative Covenants. So long as any Note shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will not, without the written consent of the Majority Lenders: (a) Liens, Etc. Create or suffer to exist, or permit any of its Subsidiaries to create or suffer to exist, any Lien upon or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any right to receive income, in each case to secure or provide for the payment of any Debt of any Person, other than: (i) purchase money Liens upon or in any property acquired or held by the Borrower or any Subsidiary of the Borrower in the ordinary course of business to secure the purchase price of such property, provided, that any such Liens attach only to the assets so purchased and the Debt (including any extensions, renewals or refinancings thereof) secured by any such Lien does not exceed 100% of the purchase price of the property being purchased, or (ii) in the case of the Borrower, purchase money Liens to secure Debt incurred solely for the purpose of financing the acquisition of any real property, fixtures or equipment acquired by the Borrower with the proceeds of such Debt, provided, that any such Liens attach only to the 47 assets so purchased and the Debt (including any extensions, renewals or refinancings thereof) secured by any such Lien does not exceed 100% of the purchase price of the property being purchased, or (iii) in the case of any Subsidiary of the Borrower, purchase money Liens to secure Debt incurred by such Subsidiary solely to finance the purchase price of real property, fixtures or equipment to the extent permitted pursuant to clause (ii) of Section 5.02(d), provided that any such Liens attach only to the assets so purchased and the Debt (including any extensions, renewals or refinancings thereof) secured by any such Lien does not exceed 100% of the purchase price of the property being purchased, or (iv) in the case of any Subsidiary of the Borrower, purchase money Liens to secure Debt assumed by such Subsidiary solely in connection with the acquisition of real property, fixtures or equipment to the extent permitted pursuant to clause (iii) of Section 5.02(d), provided that any such Liens attach only to the assets so purchased and the Debt (including any extensions, renewals or refinancings thereof) secured by any such Lien does not exceed 100% of the purchase price of the property being purchased, or (v) in the case of any Subsidiary of the Borrower, Liens to secure Debt assumed solely in connection with an acquisition to the extent permitted pursuant to clause (iv) of Section 5.02(d), provided that any such Liens attached only to the assets so acquired and the assumption of such Debt (including any extensions, renewals or refinancing's thereof) secured by any such Lien does not exceed 100% of the purchase price of the asset being acquired, or (vi) in the case of the Borrower, Liens existing on property at the time of the acquisition thereof by the Borrower (other than any such Lien created in contemplation of such acquisition that was not incurred to finance the acquisition of such property), or (vii) Any extensions, renewals or replacements of any of the Liens permitted by subclauses (i) through (vi) above or subclause (x) below for the same or a lesser amount, provided, however, that no such Liens shall extend to or cover any properties not theretofore subject to the Lien being extended, renewed or replaced, or (viii) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings and for which appropriate reserves have been made in accordance with generally accepted accounting principles, or 48 (ix) Liens incidental to the conduct of its business or the ownership of its property and assets which were not incurred in connection with the borrowing of money or the obtaining of advances or credit, and which do not in the aggregate materially detract from the value of its property or assets or materially impair the use thereof in the operation of its business, or (x) Liens existing on the date hereof, or (xi) Liens not otherwise permitted by the foregoing clauses of this Section 5.02(a) securing Debt, provided that the aggregate principal amount of Debt secured by such Liens at the time any such Lien is created does not exceed 5% of Consolidated Tangible Assets (determined by reference to the most recent balance sheet submitted pursuant to Section 5.01(e)(i)). (b) Mergers, Etc. Merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to any Person, or permit any of its Subsidiaries to do so, except that: (i) any Subsidiary of the Borrower may merge or consolidate with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with any one or more other Subsidiaries of the Borrower, (ii) the Borrower or any Subsidiary of the Borrower may sell, lease, transfer or otherwise dispose of any of its assets to the Borrower or any Subsidiary of the Borrower, as the case may be, (iii) the Borrower or any Subsidiary of the Borrower may merge with any other corporation, provided that the Borrower or such Subsidiary shall be the continuing or surviving corporation, and (iv) the Borrower may engage in transactions permitted by Section 5.02(c), provided that, in the case of each transaction permitted under this Section 5.02(b), at the time of such proposed transaction and immediately after giving effect to such proposed transaction, no Default shall have occurred and be continuing. (c) Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose of, or permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of, its 49 assets, or grant any option or other right to purchase, lease or otherwise acquire its assets, other than: (i) sales of inventory in the ordinary course of its business, (ii) any sale of assets in a transaction authorized by subsections (b) (i), (ii) or (iii) of this Section 5.02, (iii) the sale of the Borrower's interest in any Subsidiary engaged principally in manufacturing businesses, (iv) sales of rights to payment and the security therefor to the extent such sales are accounted for as true sales in accordance with generally accepted accounting principles and (v) other sales, leases, transfers or other dispositions of assets of the Borrower or any of its Subsidiaries not to exceed in the aggregate 15% of the Consolidated Tangible Assets (determined by reference to the most recent balance sheet submitted pursuant to Section 5.01(e)(i)) for all such sales, leases, transfers or other dispositions. (d) Debt of Subsidiaries. Permit any of its Subsidiaries to create, incur, assume or suffer to exist any Debt, other than: (i) Debt owed to the Borrower or to a wholly owned Subsidiary of the Borrower, (ii) Debt incurred to finance the purchase price of real property, fixtures or equipment acquired by such Subsidiary from a Person other than the Borrower or any other Subsidiary of the Borrower, provided that such real property, fixtures or equipment shall be purchased on an arm's-length basis and at a fair market value as reasonably determined at the time of such acquisition by the authorized officers or the Board of Directors of the Borrower, as the case may be, in a manner consistent with the Borrower's standard procedures, (iii) secured Debt assumed by such Subsidiary in connection with the acquisition of real property, fixtures or equipment which Debt (x) is secured only by such property and (y) is outstanding at the time of the acquisition of such property and not incurred to finance the acquisition thereof, (iv) secured Debt of a Person that is acquired by the Borrower or a Subsidiary of the Borrower, which Person will be, upon such acquisition, a Subsidiary of the Borrower and which Debt (x) is secured 50 only by the assets of such Person and (y) is outstanding at the time of the acquisition of such Person and not incurred to finance the acquisition thereof, (v) indorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, (vi) Debt existing on the date hereof (all Debt of the Subsidiaries of the Borrower for borrowed money in a principal amount of $5,000,000 or greater existing on the date hereof is described on Schedule IV), (vii) any extension, refinancing, or renewal of any of the Debt specified in subclauses (i) through (iv) and subclause (vi) of this subsection (d) not resulting in an increase in the principal amount of such Debt so extended, refinanced, or renewed and (viii) Debt not otherwise permitted by the foregoing clauses of this Section 5.02(d), provided that the aggregate principal amount of such Debt at the time any such Debt is incurred does not exceed 2 1/2% of Consolidated Tangible Assets (determined by reference to the most recent balance sheet submitted pursuant to Section 5.01(e)(i)); and that the aggregate amount permitted under this clause (viii), together with the aggregate amount of Debt secured by Liens permitted solely pursuant to clause (xi) of Section 5.02(a), does not exceed 5% of such Consolidated Tangible Assets. ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing: (a) The Borrower shall fail to pay (i) any principal of any Note or Reimbursement Obligation when the same becomes due and payable; (ii) any interest on any Note or any other amount due hereunder (other than as set forth in clause (iii) of this subsection (a)), in each case within three (3) days of the date on which the same becomes due and payable; or (iii) fees required to be paid pursuant to Section 2.06, and amounts due under Section 8.08, in each case within three (3) days of notice thereof; or 51 (b) Any written representation or warranty made by the Borrower (or any of its officers) herein or in connection with this Agreement shall prove to have been incorrect in any material respect when made; or (c) The Borrower shall fail to perform or observe (i) any term, covenant or agreement contained in Section 5.01(d), 5.01(e) or 5.02, or (ii) any other term, covenant or agreement contained in this Agreement on its part to be performed or observed if the failure to perform or observe such other term, covenant or agreement shall remain unremedied for thirty (30) days after the earliest of: (i) the date written notice thereof shall have been given to the Borrower by the Agent or any Lender; (ii) the date written notice thereof shall have been given by the Borrower to the Agent or any Lender; and (iii) the date by which the Borrower was required to have delivered to the Lenders the statement required under Section 5.01(f)(ii); or (d) The Borrower or any of its Subsidiaries shall fail to pay any principal of or premium or interest on any Debt that is outstanding in a principal amount of at least $25,000,000 individually or $50,000,000 in the aggregate (but excluding Debt evidenced by the Notes) of the Borrower or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or the Borrower or any of its Subsidiaries shall fail to be in compliance with any covenant measuring the Borrower's or such Subsidiary's financial performance under any agreement or instrument relating to any Debt outstanding in a principal amount of at least $25,000,000 individually or $50,000,000 in the aggregate (but excluding Debt evidenced by the Notes) and such failure shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate or to permit the acceleration of, the maturity of such Debt; or any Debt outstanding in a principal amount of at least $25,000,000 individually or $50,000,000 in the aggregate (but excluding Debt evidenced by the Notes) shall be declared to be due and payable, or required to be prepaid (other than by a required prepayment), redeemed, purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or (e) The Borrower or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order 52 for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of sixty (60) days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Borrower or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or (f) Any judgment or order for the payment of money in excess of $25,000,000 or more in the case of any one judgment or order and $50,000,000 or more in the aggregate for all such judgments and orders (to the extent not covered by insurance), or otherwise materially adverse to the business, condition (financial or otherwise), results of operations or prospects of the Borrower and its Subsidiaries taken as a whole shall be rendered against the Borrower or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of ten (10) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (g) any ERISA Event shall have occurred with respect to a Plan of the Borrower or any of its ERISA Affiliates and the sum (determined as of the date of occurrence of such ERISA Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans of the Borrower and its ERISA Affiliates with respect to which an ERISA Event shall have occurred and then exist (or the liability of the Borrower and its ERISA Affiliates related to such ERISA Event) exceeds $25,000,000 in any one case or $50,000,000 in the aggregate; or (h) the Borrower or any of its ERISA Affiliates shall have been notified by the sponsor of a Multiemployer Plan of the Borrower or any of its ERISA Affiliates that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Borrower and its ERISA Affiliates as Withdrawal Liability (determined as of the date of such notification), exceeds $25,000,000 in any one case or $50,000,000 in the aggregate; or (i) the Borrower or any of its ERISA Affiliates shall have been notified by the sponsor of a Multiemployer Plan of the Borrower or any of its ERISA Affiliates that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, and as a result of such reorganization or termination the aggregate contributions of the Borrower and its ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts otherwise 53 required to be contributed to such Multiemployer Plans by an amount exceeding $25,000,000 in any one case or $50,000,000 in the aggregate; then, and in any such event, the Agent (i) shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, declare the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, declare the Notes, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower, and demand that the Borrower pay into the Holding Account an amount of cash equal to the aggregate amount available for drawing under all outstanding Letters of Credit; provided, however, that, in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Federal Bankruptcy Code, (A) the obligation of each Lender to make Advances shall automatically be terminated, (B) the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower and (C) the Borrower will pay to the Agent, for deposit in the Holding Account, an amount of cash equal to the aggregate amount available for drawing under all outstanding Letters of Credit. ARTICLE VII THE AGENT SECTION 7.01 Appointment The Lenders hereby appoint Bankers Trust as the Agent to act as specified herein and in the Notes. Each Lender hereby irrevocably authorizes and each holder of any Note by the acceptance of such Note shall be deemed to irrevocably authorize the Agent to take such action on its behalf under the provisions hereof, the Notes (including, without limitation, to give notices and take such actions on behalf of the Majority Lenders as are consented to in writing by the Majority Lenders) and any other instruments, documents and agreements referred to herein or therein and to exercise such powers hereunder and thereunder as are specifically delegated to the Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Agent may perform any of its duties hereunder and under the Notes, by or through its officers, directors, agents, employees or affiliates. SECTION 7.02. Nature of Duties. The Agent shall have no duties or responsibilities except those expressly set forth in this Agreement. The duties of the Agent shall be mechanical and administrative in nature. EACH LENDER HEREBY ACKNOWLEDGES AND AGREES THAT THE AGENT SHALL NOT HAVE, BY REASON OF THIS AGREEMENT OR ANY NOTES, A FIDUCIARY RELATIONSHIP TO OR IN RESPECT OF ANY LENDER. Nothing in this 54 Agreement or in any Note, expressed or implied, is intended to or shall be so construed as to impose upon the Agent any obligations in respect of the Agreement or any Note except as expressly set forth herein or therein. Each Lender shall make its own independent investigation of the financial condition and affairs of the Borrower in connection with the making and the continuance of the Loans hereunder and shall make its own appraisal of the credit worthiness of the Borrower, and the Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before making of the Loans or at any time or times thereafter (except as set forth in this Agreement). The Agent will promptly notify each Lender at any time that the Majority Lenders have instructed it to act or refrain from acting pursuant to Article VI. None of the Syndication Agent, Co-Agents or Lead Managers shall have any specified duties under this Agreement. SECTION 7.03. Exculpation, Rights Etc. Neither the Agent nor any of its officers, directors, agents, employees or affiliates shall be liable for any action taken or omitted by them hereunder or under any Note, or in connection herewith or therewith, unless caused by its or their gross negligence or willful misconduct. The Agent shall not be responsible to any Lender for any recitals, statements, representations or warranties herein or for the execution, effectiveness, genuineness, validity, enforceability, collectibility, or sufficiency of this Agreement or any Note or any other document or the financial condition of the Borrower. The Agent shall not be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any Note or any other document or the financial condition of the Borrower, or the existence or possible existence of any Default or Event of Default unless requested to do so by the Majority Lenders. The Agent may at any time request instructions from the Lenders with respect to any actions or approvals (including the failure to act or approve) which by the terms of this Agreement or the Notes, the Agent is permitted or required to take or to grant, and if such instructions are requested, the Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval and shall not be under any liability whatsoever to any Person for refraining from any action or withholding any approval under any this Agreement or the Notes until it shall have received such instructions from the Majority Lenders. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Agent as a result of the Agent acting, approving or refraining from acting or approving under any of the Loan Documents in accordance with the instructions of the Majority Lenders or, to the extent required by Section 8.01, all of the Lenders. SECTION 7.04 Reliance. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any notice, writing, resolution notice, statement, certificate, order or other document or any telephone, telex, teletype or facsimile transmission message believed by it to be genuine and correct and to have been signed, sent or made by the proper Person, and, with respect to all matters pertaining herein or to any Note and its duties hereunder or thereunder, upon advice of counsel selected by the Agent. 55 SECTION 7.05 Indemnification. To the extent the Agent is not reimbursed and indemnified by the Borrower, the Lenders will reimburse and indemnify the Agent for and against any and all liabilities, obligations, losses, damages, claims, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or any Note or any action taken or omitted by the Agent under this Agreement or any Note, in proportion to each Lender's Syndicated Commitment Percentage; provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, claims, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. The obligations of the Lenders under this Section 7.05 shall survive the payment in full of the Notes and the termination of this Agreement. SECTION 7.06 Agent In Its Individual Capacity. With respect to its Advances, Swingline Loans, Commitment (and its Percentage thereof), Swingline Commitment and Letters of Credit, the Agent shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender or holder of obligations hereunder. The terms "Lenders", "holder of obligations" or "Majority Lenders" or any similar terms shall, unless the context clearly otherwise indicates, include the Agent in its individual capacity as a Lender, one of the Majority Lenders or a holder of obligations hereunder. The Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with the Borrower or any Subsidiary or Affiliate of the Borrower as if it were not acting as the Agent hereunder or under the Notes, including, without limitation, the acceptance of fees or other consideration for services without having to account for the same to any of the Lenders. SECTION 7.07 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has received written notice from a Lender or the Borrower referring to this Agreement describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders. SECTION 7.08 Holders of Obligations. The Agent may deem and treat the payee of any obligation hereunder as reflected on the books and records of the Agent as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with the Agent pursuant to Section 8.07(c). Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any obligation hereunder shall be conclusive and binding on any subsequent holder, transferee or assignee of such obligation or of any obligation or obligations granted in exchange therefor. 56 SECTION 7.09 Resignation by the Agent. (a) The Agent may resign from the performance of all its functions and duties hereunder at any time by giving thirty (30) Business Days' prior written notice to the Borrower and the Lenders. Such resignation shall take effect upon the acceptance by a successor Agent of appointment pursuant to clauses (b) and (c) below or as otherwise provided below. (b) Upon any such notice of resignation, the Majority Lenders shall appoint a successor Agent who shall be satisfactory to the Borrower and shall be an incorporated bank or trust company. (c) If a successor Agent shall not have been so appointed within said thirty (30) Business Day period, the Agent, with the consent of the Borrower, shall then appoint a successor Agent who shall serve as the Agent until such time, if any, as the Majority Lenders, with the consent of the Borrower, appoint a successor Agent as provided above. (d) If no successor Agent has been appointed pursuant to clause (b) and if the Borrower has not provided the necessary consent pursuant to clause (c) by the thirty-fifth (35th) Business Day after the date such notice of resignation was given by Agent, Agent's resignation shall become effective and the Majority Lenders shall thereafter perform all the duties of Agent hereunder until such time, if any, as the Majority Lenders, with the consent of Borrower, appoint a successor Agent as provided above. ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement or the A Notes, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Lenders (and, if the rights or duties of the Agent, any LC Bank or the Swingline Lender are affected thereby, by the Agent, such LC Bank or the Swingline Lender, as the case may be), and then such waiver, consent or other agreement shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all the Lenders effected thereby, do any of the following: (a) waive any of the conditions specified in Section 3.01, 3.02 or 3.03, (b) increase the Commitments of the Lenders or subject the Lenders to any additional obligations other than pursuant to 57 Section 2.07(b), (c) reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, (d) postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, (e) reduce the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Lenders, that shall be required for the Lenders or any of them to take any action hereunder, (f) extend the Termination Date except as provided pursuant to Section 2.20, (g) extend the expiration date of any Letter of Credit to a date beyond the latest possible Termination Date then in effect under this Agreement, or (h) amend this Section 8.01; and provided further that no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Agent under this Agreement or any Note. SECTION 8.02. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including facsimile transmission, telegraphic, telex or cable communication) and mailed, transmitted, telegraphed, telexed, cabled or delivered, if to the Borrower, at its address at 11840 Valley View Road, Eden Prairie, MN 55344, Attention: Treasurer with a copy to the Corporate Secretary of the Borrower, at the aforesaid address, if to any Lender, at its Domestic Lending Office specified opposite its name on Schedule II hereto; if to any other Lender, at its Domestic Lending Office specified in the Assignment and Assumption Agreement or in the agreement entered into by such Lender pursuant to Section 2.07(b), pursuant to which it became a Lender; and if to the Agent, at its address at 130 Liberty Street, New York, New York 10006, Attention: Jim Cullen; or as to the Borrower or the Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Agent. All such notices and communications shall, when mailed, transmitted, telegraphed, telexed or cabled, be effective when deposited in the mails, telecopied, delivered to the telegraph company, confirmed by telex answerback or delivered to the cable company, respectively, except that notices and communications to the Agent pursuant to Article II or VII shall not be effective until received by the Agent. SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender or the Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay on demand all reasonable costs and expenses of the Agent in connection with the preparation, execution, delivery, modification and amendment of this Agreement, the Notes and the other documents to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Agent with respect thereto and with respect to advising the Agent as to its rights and responsibilities under this Agreement. The Borrower further agrees to pay on demand all reasonable costs and 58 expenses, if any (including, without limitation, reasonable counsel fees and expenses) of the Agent and the Lenders, in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement, the Notes and the other documents to be delivered hereunder, including, without limitation, reasonable counsel fees and expenses in connection with the enforcement of rights under this Section 8.04(a). (b) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance, or any B Advance which bears interest based on a rate per annum at which deposits in U.S. dollars are offered to prime banks in the London interbank market, is made by the Borrower to or for the account of a Lender other than on the last day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 2.11(g), 2.13 or 2.15 or acceleration of the maturity of the Notes pursuant to Section 6.01 or for any other reason, the Borrower shall, upon written demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses that it may reasonably incur as a result of such payment or Conversion, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. (c) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in Section 2.18 shall survive the payment in full of principal and interest hereunder and under the Notes. SECTION 8.05. Right of Setoff. Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01, each Lender and the Agent are hereby authorized at any time and from time to time, to the fullest extent permitted by law to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or the Agent to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement and any Note held by such Lender or the Agent, whether or not such Lender or the Agent shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender and the Agent agree promptly to notify the Borrower after any such setoff and application made by such Lender or the Agent, provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender and the Agent under this Section 8.05 are in addition to other rights and remedies (including, without limitation, other rights of setoff) which such Lender and the Agent may have. SECTION 8.06. Binding Effect. This Agreement shall become effective (other than Sections 2.01 and 2.03, which shall only become effective upon satisfaction of 59 the conditions set forth in Section 3.01) when it shall have been executed by the Borrower and the Agent and when the Agent shall have been notified by each Bank that such Bank has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, the Agent and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders. SECTION 8.07. Assignments and Participations. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Lenders. (b) Any Lender may at any time grant to one or more lenders or other institutions (each a "Participant") participating interests in its Commitment or any or all of its A Advances. In the event of any such grant by a Lender of a participating interest to a Participant, whether or not upon notice to the Borrower and the Agent, such Lender shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement pursuant to which any Lender may grant such a participating interest shall provide that such Lender shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Lender will not agree to any modification, amendment or waiver of this Agreement described in clause (c) or (d) of Section 8.01 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article VIII with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Lender may at any time assign to one or more Eligible Assignees (each an "Assignee") all, or a proportionate part (such portion to be in an amount equal to all of such Lender's Commitment or equal to or greater than $10,000,000 or an integral multiple of $1,000,000 in excess thereof) of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an assignment and assumption agreement in substantially the form of Exhibit C hereto (an "Assignment and Assumption Agreement") executed by such Assignee and such transferor Lender, with (and subject to) the subscribed consent of the Borrower and the Agent, such consents not to be unreasonably withheld; provided that if an Assignee is an Affiliate of such transferor Lender or another Lender, neither the Borrower's nor the Agent's consent shall be required; and provided further that such assignment may, but need not, include rights of the transferor Lender in respect of 60 outstanding B Advances. Notwithstanding the foregoing, no assigning Lender shall, after giving effect to any such assignment, and as determined on the effective date of the Assignment and Assumption Agreement with respect thereto, retain a Commitment hereunder of less than $10,000,000. Upon execution of an Assignment and Assumption Agreement and the payment of a nonrefundable assignment fee of $3,500 in immediately available funds to the Agent at its Payment Office in connection with each such assignment ($3,500 with respect to assignments to any Lender or an Affiliate of such Lender), written notice thereof by such transferor Lender to the Agent and the recording by the Agent of such assignment in the register maintained by the Agent and the resulting effect upon the Advances of the assigning Lender and the Assignee, the Assignee shall have, to the extent of such assignment, the same rights and benefits as it would have if it were a Lender hereunder and the holder of a Note (provided that the Borrower and the Agent shall be entitled to continue to deal solely and directly with the assignor Lender in connection with the interests so assigned to the Assignee until written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Borrower and the Agent by the assignor Lender and the Assignee) and, if the Assignee has expressly assumed, for the benefit of the Borrower, some or all of the transferor Lender's obligations hereunder, such transferor Lender shall be relieved of its obligations hereunder to the extent of such assignment and assumption. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the date it becomes a Lender under this Agreement, deliver to the Borrower and the Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 2.18. Each Assignee shall take such Advances and Commitment subject to the provisions of this Agreement and to any request made, waiver or consent given or other action taken hereunder, prior to the receipt by the Agent and the Borrower of written notice of such transfer, by each previous holder of such Advances and Commitment. Such Assignment and Assumption Agreement shall be deemed to amend this Agreement and Schedule I hereto, to the extent, and only to the extent, necessary to reflect the addition of such Assignee as a Lender and the resulting adjustment of all or a portion of the rights and obligations of such transferor Lender under this Agreement, the determination of its Percentage (in each case, rounded to twelve decimal places), the Advances and any new Notes to be issued, at the Borrower's expense, to such Assignee, and no further consent or action by the Borrower or the Lenders shall be required to effect such amendments. (d) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time pledge or assign all or any portion of its rights under this Agreement and the other documents executed and delivered in connection herewith (including, without limitation, the Note held by it) to any Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Board without notice to, or the consent of, the Borrower or the Agent and with the consent of the Borrower and the Agent. No such pledge or assignment shall release the transferor Lender from its obligations hereunder. 61 (e) No Assignee, Participant or other transferee of any Lender's rights shall be entitled to receive any greater payment under Section 2.14 than such Lender would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 2.14 or 2.15 requiring such Lender to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. SECTION 8.08. Indemnification. The Borrower agrees to indemnify and hold harmless the Agent, each Lender and each of their Affiliates and their respective directors, officers, employees, agents, advisors and representatives (each, an "Indemnified Party"), from and against, and to promptly reimburse them and each of them, for any and all liabilities, losses, damages, actions, judgments, suits, claims, costs, out-of-pocket expenses (including, without limitation, interest, penalties and all reasonable attorneys' fees and expenses) and settlement costs that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of, or in connection with the preparation for a defense of, any litigation or proceeding or governmental action or investigation (administrative or judicial), arising out of, related to or in connection with the actual or proposed use of the proceeds of the Advances, whether or not such investigation, litigation or proceeding is brought by the Borrower, its directors, shareholders or creditors or an Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto or is otherwise required to respond thereto, provided that the Borrower shall not be liable hereunder to the extent such claim, damage, loss, liability, or expense (i) arises out of any settlement made without the Borrower's consent, which consent shall not unreasonably be withheld, (ii) arises out of any proceeding brought against any Indemnified Party by a security holder of such Indemnified Party based upon rights afforded such security holder solely in its capacity as such, (iii) arises solely from disputes among two or more Indemnified Parties, (iv) is found in a final, non- appealable judgment of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnified Party or (v) is found in a final, non-appealable judgment of a court of competent jurisdiction to have resulted solely from such Indemnified Party's breach of its obligations under the Loan Documents. SECTION 8.09. Governing Law; Submission to Jurisdiction. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. SECTION 8.10. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of 62 which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 8.11. Confidentiality. Except to the extent permitted by this Section 8.11 or by Section 8.07(g), the Lenders shall keep confidential all non-public information obtained by them from the Borrower pursuant to this Agreement that has been identified as such by the Borrower; provided, however, that Lenders may make such disclosure thereof as is required or requested by any governmental agency or self-regulatory organization or representative thereof with supervisory jurisdiction over it or pursuant to legal process, or as may otherwise be required by law or court order; provided further, however, that, unless specifically prohibited by applicable law or court order, each Lender shall notify the Borrower of any request received by it from any governmental agency or self-regulatory organization or representative thereof (other than any such request in connection with an examination of such Lender by a governmental agency or self-regulatory organization with supervisory jurisdiction over it) for disclosure of any such non-public information prior to disclosure of such information so that the Borrower may seek an appropriate protective order. The Borrower authorizes each Lender to disclose to any of its Affiliates, attorneys, auditors and accountants and any prospective Lender or participant any and all information in such Lender's possession concerning the Borrower and any Subsidiary of the Borrower that has been delivered to such Lender by or on behalf of the Borrower pursuant to Section 5.01(f), provided that each such Person shall agree to keep such information confidential in accordance with this Section 8.11. In no event shall any Lender be obligated or required to return any materials furnished by or on behalf of the Borrower or any of its Subsidiaries. Notwithstanding the foregoing, this Section 8.11 shall not apply to any information that is or becomes generally available to the public other than as a result of the disclosure by any Lender, participant, prospective Lender or participant or their respective representatives. SECTION 8.12. WAIVER OF JURY TRIAL, ETC. EACH OF THE BORROWER, THE AGENT, THE CO-AGENTS, THE LEAD MANAGERS AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE ADVANCES OR THE ACTIONS OF THE AGENT, ANY CO-AGENT, ANY LEAD MANAGER OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. [Signature Page Follow] 63 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. SUPERVALU INC. By: /s/ Kim M. Erickson ----------------------------------------- Name: Kim M. Erickson Title: Senior Vice President - Finance BANKERS TRUST COMPANY, as Agent By: /s/ Robert R. Telesca ----------------------------------------- Name: Robert R. Telesca Title: Assistant Vice President S-1 to S-2 CITIBANK, N.A., as Syndication Agent By: /s/ Robert D. Wetrus ----------------------------------------- Name: Robert D. Wetrus Title: Attorney-In-Fact FIRST BANK NATIONAL ASSOCIATION, as a Co-Agent By: /s/ Mark R. Olmon ----------------------------------------- Name: Mark R. Olmon Title: Vice President THE FUJI-BANK, LIMITED, as a Co-Agent By: /s/ Peter L. Chinnici ----------------------------------------- Name: Peter L. Chinnici Title: Joint General Manager NATIONSBANK, N.A., as a Co-Agent By: /s/ Valerie C. Mills ----------------------------------------- Name: Valerie C. Mills Title: Sr. Vice President S-3 to S-6 PNC BANK, NATIONAL ASSOCIATION, as a Co-Agent By: /s/ Gregory T. Gaschler ----------------------------------------- Name: Gregory T. Gaschler Title: Vice President BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, as a Lead Manager By: /s/ G. Burton Queen ----------------------------------------- Name: G. Burton Queen Title: Managing Director THE BANK OF NEW YORK, as a Lead Manager By: /s/ Richard A. Raffetto ----------------------------------------- Name: Richard A. Raffetto Title: Vice President THE FIRST NATIONAL BANK OF CHICAGO, as a Lead Manager By: /s/ Catherine A. Muszynski ----------------------------------------- Name: Catherine A. Muszynski Title: Vice President S-7 to S-10 FLEET NATIONAL BANK, as a Lead Manager By: /s/ Christopher J. Kampe ----------------------------------------- Name: Christopher J. Kampe Title: Assistant Vice President MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a Lead Manager By: /s/ John M. Mikolay ----------------------------------------- Name: John M. Mikolay Title: Vice President NORWEST BANK MINNESOTA NATIONAL ASSOCIATION, as a Lead Manager By: /s/ Molly Van Metre ----------------------------------------- Name: Molly Van Metre Title: Vice President THE BANK OF TOKYO-MITSUBISHI, LTD., CHICAGO BRANCH By: /s/ Jeffrey R. Arnold ----------------------------------------- Name: Jeffrey R. Arnold Title: Vice President S-11 to S-14 THE DAI-ICHI KANGO BANK, LTD., CHICAGO BRANCH By: /s/ Seiichiro Ino ----------------------------------------- Name: Seiichiro Ino Title: Vice President THE FIFTH THIRD BANK By: /s/ David C. Gordley ----------------------------------------- Name: David C. Gordley Title: Corporate Account Officer KEYBANK NATIONAL ASSOCIATION By: /s/ Frank J. Jancar ----------------------------------------- Name: Frank J. Jancar Title: Vice President MERCANTILE BANK NATIONAL ASSOCIATION By: /s/ Stephen M. Reese ----------------------------------------- Name: Stephen M. Reese Title: Vice President S-15 to S-18 WACHOVIA BANK, N.A. By: /s/ John A. Robertson ----------------------------------------- Name: John A. Robertson Title: Senior Vice President S-19 EX-10.B 3 EMPLOYEE STOCK OPTION PLAN EXHIBIT (10)b SUPERVALU INC. 1983 EMPLOYEE STOCK OPTION PLAN 1. PURPOSE. The purpose of this Plan is to promote the interests of SUPERVALU INC., a Delaware corporation (the "Corporation"), and its stockholders by encouraging selected key salaried management employees of the Corporation, and members of the Board of Directors who are not also employees of the Corporation, to invest in shares of the Corporation's Common Stock with the increased personal interest and effort in the continued success and progress of the business that stock ownership can produce, and by providing additional means of attracting and retaining competent executive personnel and directors. 2. ADMINISTRATION; GRANTING OF OPTIONS. The Plan shall be administered by the Board of Directors of the Corporation. The Board of Directors shall have full authority in its discretion, but subject to the express provisions of the Plan, to: (a) determine the purchase price of the Common Stock covered by each option; (b) determine the persons to whom and the time or times at which options shall be granted; (c) determine the number of shares to be subject to each option; (d) determine terms and provisions (and amendments thereof) of the respective option agreements (which need not be identical), including such terms and provisions (and amendments) as shall be required in the judgment of the Board to conform to any law or regulation applicable thereto; (e) determine which options shall be Incentive Stock Options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"); (f) accelerate the time at which all or any part of an option may be exercised; (g) modify or amend any outstanding option agreement subject to the consent of optionee; -1- (h) interpret the Plan and prescribe, amend and rescind rules and regulations relating to it; (i) make all other determinations deemed necessary or advisable for the administration of the Plan. All decisions, determinations and selections made by the Board of Directors on the foregoing matters shall be conclusive. The granting of an option pursuant to the Plan shall be effective only when an option is duly awarded to an employee or director by the Board of Directors. The Executive Committee of the Corporation, in addition to and not to the exclusion of the Board of Directors of the Corporation, is authorized to exercise all of the powers authorized and conferred by the Plan on the Board of Directors other than the power under Section 12 of this Plan to terminate and amend the Plan. The Board of Directors may also authorize, at any time, the formation of a Stock Option Committee (the "Committee"), consisting of three or more members appointed from time to time by the Board, which Committee would have authority to exercise the powers conferred on the Board under the Plan, other than the power under Section 12 herein to terminate and amend the Plan. In addition, the Board of Directors may authorize, at any time, the Chief Executive Officer of the Corporation to extend the period of exercise of certain Incentive Stock Options and non-incentive (non-qualified) stock options in accordance with the provisions set forth in the option agreement. 3. ELIGIBILITY; FACTORS TO BE CONSIDERED IN GRANTING STOCK OPTIONS. Incentive Stock Options may be granted only to key salaried management employees (which term, as used herein, includes officers) of the Corporation and of its present and future subsidiary corporations. Options which do not qualify as Incentive Stock Options may be granted to key salaried management employees of the Corporation and of its present and future subsidiary corporations and to members of the Board of Directors of the Corporation who are not also employees of the Corporation or one of its subsidiaries ("Non-Employee Directors"), provided, however, that options shall be granted to Non-Employee Directors only pursuant to Section 7 hereof. In determining the employees to whom options shall be granted and the number of shares to be covered by each such option, the Board of Directors may take into account the nature of the services rendered by the respective employees, their present and potential contributions to the success of the Corporation and such other factors as the Board of Directors, in its discretion, shall deem relevant. -2- Subject to the provisions of Section 10 herein, an employee who has been granted an option under the Plan or under any prior stock option plan of the Corporation may be granted an additional option or options under the Plan if the Board of Directors shall so determine. 4. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in Section 11 herein: (a) the stock to be offered under the Plan shall be shares of the Corporation's authorized Common Stock, par value $1.00 per share, which may be either shares reacquired and held in the treasury of the Corporation or authorized but unissued shares; and (b) the aggregate number of shares which may be issued under all options granted pursuant to the Plan shall be 4,500,000 shares. Shares subject to, but not issued under, any option terminating or expiring for any reason prior to exercise thereof in full shall again be available for other options thereafter granted under the Plan. 5. TERM OF PLAN AND OF EACH OPTION AGREEMENT; EXERCISE OF OPTIONS. The period during which options may be granted under the Plan shall expire February 7, 1999. The term of each option so granted shall expire not more than ten years from the date the option is granted. The Board of Directors may determine at the time of granting whether each such option is exercisable in full, in part from time to time or in installments, which may be cumulative from year to year during such term to the extent not exercised in a prior year; provided, however, that notwithstanding the foregoing, from and after a Change of Control (as hereinafter defined), all options granted under the Plan, including options granted to Non-Employee Directors pursuant to Section 7 hereof, shall become immediately exercisable to the full extent of the original award. As used herein, "Change of Control" shall mean any of the following events: (i) The acquisition by any person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Corporation or any of its wholly-owned subsidiaries, or any employee benefit plan of the Corporation and/or one or more of its wholly-owned subsidiaries, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either the then outstanding shares of Common Stock or the combined voting power of the Corporation's then outstanding voting securities in a transaction or series of transactions not approved in -3- advance by a vote of at least three-quarters of the Continuing Directors (as hereinafter defined); or (ii) Individuals who, as of April 13, 1988, constitute the Board of Directors of the Corporation (generally the "Directors" and as of April 13, 1988 the "Continuing Directors") cease for any reason to constitute at least a majority thereof, provided that any person becoming a Director subsequent to April 13, 1988 whose nomination for election was approved in advance by a vote of at least three-quarters of the Continuing Directors (other than a nomination of an individual whose initial assumption of office is in connection with an actual or threatened solicitation with respect to the election or removal of the Directors of the Corporation, as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall be deemed to be a Continuing Director; or (iii) The approval by the stockholders of the Corporation of a reorganization, merger, consolidation, liquidation or dissolution of the Corporation or of the sale (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation other than a reorganization, merger, consolidation, liquidation, dissolution or sale approved in advance by a vote of at least three quarters of the Continuing Directors; or (iv) The first purchase under any tender offer or exchange offer (other than an offer by the Corporation or any of its subsidiaries) pursuant to which shares of Common Stock are purchased. Options granted under this Plan need not be identical with respect to the terms of exercise thereof. Subject only to the foregoing limitations, options may be exercised in whole at any time or in part from time to time during the option term by serving written notice of exercise on the Corporation, accompanied by payment of the purchase price. The Board of Directors or the Committee, as the case may be, may grant "restoration" options, separately or together with another option, pursuant to which, subject to the terms and conditions established by the Board of Directors or the Committee, as the case may be, and any applicable requirements of Rule 16b-3 promulgated under the Exchange Act or any other applicable law, the optionee would be granted a new option when the payment of the exercise price of the option to which such "restoration" option relates is made by the delivery of shares of the Corporation's Common Stock owned by the optionee, as described in Section 6 hereof, which new option would be an option to purchase the number of shares not exceeding the sum of (a) the number of shares of the Corporation's Common Stock tendered as payment upon the exercise of the option to which such "restoration" option relates, (b) the number of shares of the Corporation's Common Stock, if any, tendered as payment of the amount to be withheld under applicable income tax laws in connection with the exercise of the option to which such "restoration" option relates, as described in Section 14 hereof, and (c) the number of shares of the Corporation's Common Stock, if any, previously owned by the optionee that are tendered as payment for additional tax obligations of the optionee in connection with the exercise of the option to -4- which such "restoration" option relates, as described in Section 14 hereof. "Restoration" options may be granted with respect to options previously granted under this Plan or any prior stock option plan of the Corporation, and may be granted in connection with any option granted under this Plan (other than an option granted to a Non-Employee Director pursuant to Section 7 hereof) at the time of such grant. The purchase price of the Common Stock under each such new option, and the other terms and conditions of such option, shall be determined by the Board of Directors or the Committee, as the case may be, consistent with the provisions of the Plan. 6. OPTION PRICES. Except with respect to options granted to Non-Employee Directors pursuant to Section 7 hereof, the purchase price of the Common Stock under each option shall be determined by the Board of Directors, but shall not be less than 100% of the fair market value of the Common Stock at the time of granting the option as found by the Board. The purchase price of the shares as to which an option shall be exercised shall be paid in full in cash at the time of exercise as shall be provided in the option agreement, and any optionee, without limitation, shall also be entitled to pay the exercise price by tendering to the Corporation shares of the Corporation's Common Stock, previously owned by the optionee, having a fair market value on the date of exercise equal to the option price (or the portion thereof not paid in cash). 7. OPTIONS TO NON-EMPLOYEE DIRECTORS. The Board of Directors or the Committee, as the case may be, shall issue options which do not qualify as Incentive Stock Options to Non-Employee Directors in accordance with this Section 7. Each Non-Employee Director serving on the Corporation's Board of Directors immediately following the Annual Meeting of Stockholders of the Corporation on June 30, 1992 shall be granted, as of June 30, 1992, an option to purchase 3,000 shares of Common Stock. Each Non-Employee Director first elected or appointed to the Corporation's Board of Directors after June 30, 1992 and during the term of the Plan shall be granted, as of the date of such Director's first election or appointment to the Board of Directors, an option to purchase 3,000 shares of Common Stock. After the initial grant to each Non-Employee Director as set forth above in this Section 7, each such Director shall be granted during the term of the Plan, as of the date of the Corporation's Annual Meeting of Stockholders in each even-numbered year, if such Director's term of office continues after such Annual Meeting, an option to purchase 3,000 shares of Common Stock. -5- Each option granted to a Non-Employee Director pursuant to this Section 7 shall have an exercise price equal to the fair market value of the shares of Common Stock as of the date of grant and shall expire on the tenth anniversary of the date of grant. "Restoration" options may not be granted to any Non- Employee Director. This Section 7 shall not be amended more than once every six months other than to comport with changes in the Code, the Employee Retirement Income Security Act or the rules and regulations thereunder. 8. ADDITIONAL TERMS. Options granted under the Plan shall not be affected by any change of duties or position so long as the optionee continues to be an employee of the Corporation or of a subsidiary (or continues to be a Director of the Corporation in the case of any Non-Employee Director). Each option agreement may contain such provisions as the Board of Directors shall approve with reference to the effect of approved leaves of absence, provided that with respect to Incentive Stock Options such provisions conform to the requirements of the Code. Nothing in the Plan or in any option granted pursuant thereto shall confer on any person any right to continue in the employ of the Corporation or of any of its subsidiaries (or to continue as a Director of the Corporation in the case of any Non-Employee Director) or affect, in any way, the right of the Corporation or any of its subsidiaries to terminate his employment (or to terminate his directorship in the case of any Non-Employee Director) at any time. No optionee, who is an employee of the Corporation at the time of grant, may be granted any option or options for more than 250,000 Shares (subject to adjustment as provided for in Section 11), taking into account all such awards granted by the Corporation pursuant to any of its stock compensation plans, in any calendar year period beginning with the period commencing January 1, 1997. The foregoing annual limitation specifically includes the grant of any options representing "qualified performance-based compensation" within the meaning of Section 162(m) of the Code. 9. DEATH; OTHER TERMINATION OF EMPLOYMENT OR DIRECTORSHIP. Each option agreement shall include provisions governing the disposition of an option in the event of the retirement, disability, death or other termination of the employment or directorship of an optionee with the Corporation or an Affiliate. 10. INCENTIVE STOCK OPTIONS. Except with respect to options granted to Non-Employee Directors pursuant to Section 7 hereof, the Board of Directors is hereby authorized to determine, upon the granting of each option, whether such option shall be an Incentive Stock Option under Section 422 of the Code or shall be an option which is not an Incentive Stock Option under Section 422. For Incentive Stock Options granted before January 1, 1987, the aggregate fair market value of the stock (determined as of the time the Incentive Stock Option is granted) covered under all Incentives Stock -6- Options granted (under this Plan and all other incentive stock option plans of the Corporation or any subsidiary), in any calendar year, shall not exceed $100,000 plus any unused limit carry-over (as provided under former Section 422(c)(4) of the Code effective for options granted before January 1, 1987). For Incentive Stock Options granted after December 31, 1986, the aggregate fair market value (determined at the time the Incentive Stock Option is granted) of the stock with respect to which all Incentive Stock Options are exercisable for the first time by an employee during any calendar year (under all plans described in subsection (b) of Section 422 of the Code of his employer corporation and its parent and subsidiary corporations) shall not exceed $100,000. 11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Notwithstand-ing any other provision of the Plan, the Board of Directors may adjust the number and class of shares subject to each outstanding option and the option prices in the event of changes in the outstanding Common Stock of the Corporation by reason of stock dividends, split-ups, recapitalizations, mergers, consolidations, combinations or exchanges of shares and the like. In the event of any such change in the outstanding Common Stock of the Corporation, the aggregate number and class of shares available under the Plan shall be appropriately adjusted by the Board of Directors, whose determination shall be conclusive. 12. TERMINATION AND AMENDMENT. The Plan may be terminated, modified or amended by the stockholders of the Corporation. Subject to Section 7 hereof, the Board of Directors of the Corporation may also terminate the Plan or make such modifications or amendments thereof as it shall deem advisable, or to conform to any change in any law or regulation applicable thereto; provided, however, that the Board of Directors may not, without further approval by the holders of a majority of the outstanding stock of the Corporation having general voting power, make any modification or amendment which operates: (a) to make any material change in the class of employees eligible to receive Incentive Stock Options as defined in Section 3 above; and (b) to increase the total number of shares for which options may be granted under the Plan, except as resulting from the operation of Section 11 above. No termination, modification or amendment of the Plan may, without the consent of the employee to whom any option shall theretofore have been granted, adversely affect the rights of such employee under such option. 13. EFFECTIVE DATE OF PLAN. The Plan shall become effective February 23, 1983, subject to approval by the shareholders of the Corporation within 12 months thereafter. -7- 14. TAX WITHHOLDING AND PAYMENT. Subject to such rules as the Board of Directors or the Committee may adopt not inconsistent with the provisions of the Plan: (a) At any time when an optionee is required to pay the Corporation an amount required to be withheld under applicable income tax laws in connection with the exercise of an option which does not qualify as an Incentive Stock Option under Section 422 of the Code, the optionee may elect to deliver to the Corporation or have the Corporation retain from the distribution, shares of Common Stock to satisfy this obligation in whole or in part (an "Election"). In addition to amounts required to be withheld to pay applicable taxes, subject to such terms and conditions as the Committee shall determine in its sole and absolute discretion, the Committee may permit an optionee to elect to deliver to the Corporation shares of Common Stock (other than shares of Common Stock issuable upon exercise of the option) with a fair market value equal to the amount of such additional federal and/or state income taxes imposed on the optionee in connection with the exercise of the option. The shares to be withheld or delivered shall be valued at 100% of the fair market value of the shares on the date that the amount of tax required to be paid shall be determined (the "Tax Date"). Fair market value of the shares shall equal the mean of the opening and closing trade prices of the shares as reported on the New York Stock Exchange on the Tax Date, or, if no trading in the shares occurs on the Tax Date, on the immediately preceding trading date. (b) Each Election must be made prior to the Tax Date. The Board or the Committee may disapprove of any Election, may suspend or terminate the right to make Elections, may limit the amount of any Election, may provide at the time of grant with respect to any option that the right to make Elections shall not apply to such option and may make rules concerning the required information to be included in any Election. An Election is irrevocable. (c) The Election may be made in an amount equal to the amount of tax required by law to be withheld with respect to the option exercise. Any fractional share withholding amount must be paid in cash. (d) If an optionee makes an Election and the optionee's Tax Date is deferred for six months from the date of exercise of the option, the optionee will initially receive the full amount of the shares, but will be unconditionally obligated to surrender to the Corporation on the Tax Date the proper number of shares to satisfy the withholding obligation, plus cash for any remainder of the withholding obligation including any fractional shares withholding amount. (e) Optionees who are "officers" or "directors" of the Corporation, as those terms are used in Section 16(b) of the Exchange Act, may only make an Election -8- in compliance with the rules established by the Board or the Committee to comply with Section 16(b). x:\group\legal\corp\stkplan\83esop\plan\83esopfn.doc Amended 2/8/95 Amended 2/14/96 Amended 4/9/97 Amended 10/15/97 -9- EX-10.C 4 1993 STOCK PLAN, AS AMENDED EXHIBIT (10)c. SUPERVALU INC. 1993 STOCK PLAN Section 1. Purpose. - ------------------- The purpose of the Plan is to promote the interests of the Company and its stockholders by aiding the Company in attracting and retaining key management personnel capable of assuring the future success of the Company, to offer such personnel incentives to put forth maximum efforts for the success of the Company's business and to afford such personnel an opportunity to acquire a proprietary interest in the Company. Section 2. Definitions. - ----------------------- As used in the Plan, the following terms shall have the meanings set forth below: (a) "Affiliate" shall mean (i) any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company and (ii) any entity in which the Company has a significant equity interest, in each case as determined by the Committee. (b) "Award" shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award, or Other Stock-Based Award granted under the Plan. (c) "Award Agreement" shall mean any written agreement, contract or other instrument or document evidencing any Award granted under the Plan. (d) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder. (e) "Committee" shall mean a committee of the Board of Directors of the Company designated by such Board to administer the Plan, which shall consist of members appointed from time to time by the Board of Directors and shall be comprised of not less than such number of directors as shall be required to permit the Plan to satisfy the requirements of Rule 16b-3. Each member of the Committee shall be a "disinterested person" within the meaning of Rule 16b-3. -1- (f) "Company" shall mean SUPERVALU INC., a Delaware corporation, and any successor corporation. (g) "Eligible Person" shall mean any employee, officer, consultant or independent contractor providing services to the Company or any Affiliate who the Committee determines to be an Eligible Person. A director of the Company who is not also an employee of the Company or an Affiliate shall not be an Eligible Person. (h) "Fair Market Value" shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. Notwithstanding the foregoing, unless otherwise determined by the Committee, the Fair Market Value of Shares on a given date for purposes of the Plan shall be the average of the opening and closing sale price of the Shares as reported on the New York Stock Exchange on such date or, if such Exchange is not open for trading on such date, on the day closest to such date when such Exchange is open for trading. (i) "Incentive Stock Option" shall mean an option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code or any successor provision. (j) "Non-Qualified Stock Option" shall mean an option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option. (k) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock Option, and shall include Restoration Options. (l) "Other Stock-Based Award" shall mean any right granted under Section 6(f) of the Plan. (m) "Participant" shall mean an Eligible Person designated to be granted an Award under the Plan. (n) "Performance Award" shall mean any right granted under Section 6(d) of the Plan. (o) "Person" shall mean any individual, corporation, partnership, association or trust. (p) "Plan" shall mean this 1993 Stock Plan, as amended from time to time. -2- (q) "Restoration Option" shall mean any Option granted under Section 6(a)(iv) of the Plan. (r) "Restricted Stock" shall mean any Share granted under Section 6(c) of the Plan. (s) "Restricted Stock Unit" shall mean any unit granted under Section 6(c) of the Plan evidencing the right to receive a Share (or a cash payment equal to the Fair Market Value of a Share) at some future date. (t) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, or any successor rule or regulation. (u) "Shares" shall mean shares of Common Stock, $1.00 par value, of the Company or such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4(c) of the Plan. (v) "Stock Appreciation Right" shall mean any right granted under Section 6(b) of the Plan. Section 3. Administration. - -------------------------- (a) Power and Authority of the Committee. The Plan shall be administered by the Committee. Subject to the express provisions of the Plan and to applicable law, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or with respect to which payments, rights or other matters are to be calculated in connection with) each Award; (iv) determine the terms and conditions of any Award or Award Agreement; (v) amend the terms and conditions of any Award or Award Agreement and accelerate the exercisability of Options or the lapse of restrictions relating to Restricted Stock, Restricted Stock Units or other Awards; (vi) determine whether, to what extent and under what circumstances Awards may be exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited or suspended; (vii) determine whether, to what extent and under what circumstances cash, Shares, other securities, other Awards, other property and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or the Committee; (viii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (ix) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (x) make any other determination and take any other action that the Committee -3- deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon any Participant, any holder or beneficiary of any Award and any employee of the Company or any Affiliate. (b) Delegation. The Committee may delegate its powers and duties under the Plan to one or more officers of the Company or any Affiliate or a committee of such officers, subject to such terms, conditions and limitations as the Committee may establish in its sole discretion; provided, however, that the Committee shall not delegate its powers and duties under the Plan with regard to officers or directors of the Company or any Affiliate who are subject to Section 16 of the Securities Exchange Act of 1934, as amended. (c) Power and Authority of the Board of Directors. Notwithstanding anything to the contrary contained herein, the Board of Directors may, at any time and from time to time, without any further action of the Committee, exercise the powers and duties of the Committee under the Plan with regard to any Person who is not an officer or director of the Company or any Affiliate who is subject to Section 16 of the Securities Exchange Act of 1934, as amended. Section 4. Shares Available for Awards. - --------------------------------------- (a) Shares Available. Subject to adjustment as provided in Section 4(c), the aggregate number of Shares which may be issued under all Awards under the Plan shall be 3,500,000. Shares to be issued under the Plan may be either Shares reacquired and held in the treasury or authorized but unissued Shares. If any Shares covered by an Award or to which an Award relates are not purchased or are forfeited, or if an Award otherwise terminates without delivery of any Shares, then the number of Shares counted against the aggregate number of Shares available under the Plan with respect to such Award, to the extent of any such forfeiture or termination, shall again be available for granting Awards under the Plan. (b) Accounting for Awards. For purposes of this Section 4, if an Award entitles the holder thereof to receive or purchase Shares, the number of Shares covered by such Award or to which such Award relates shall be counted on the date of grant of such Award against the aggregate number of Shares available for granting Awards under the Plan. (c) Adjustments. In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, other securities or -4- other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or other property) which thereafter may be made the subject of Awards, (ii) the number and type of Shares (or other securities or other property) subject to outstanding Awards and (iii) the purchase or exercise price with respect to any Award; provided, however, that the number of Shares covered by any Award or to which such Award relates shall always be a whole number. (d) Award Limitations Under the Plan. No Eligible Person, who is an employee of the Company at the time of grant, may be granted any Option, Stock Appreciation Right and such Other Stock Based Award (the value of which is based solely on an increase in the value of the Shares after the date of grant) for more than 250,000 Shares (subject to adjustment as provided for in Section 4(c)), taking into account all such awards granted by the Company pursuant to any of its stock compensation plans, in any calendar year period beginning with the period commencing January 1, 1997. The foregoing annual limitation specifically includes the grant of any Awards representing "qualified performance-based compensation" within the meaning of Section 162(m) of the Code. Section 5. Eligibility. - ----------------------- Any Eligible Person, including any Eligible Person who is an officer or director of the Company or any Affiliate, shall be eligible to be designated a Participant. In determining which Eligible Persons shall receive an Award and the terms of any Award, the Committee may take into account the nature of the services rendered by the respective Eligible Persons, their present and potential contributions to the success of the Company or such other factors as the Committee, in its discretion, shall deem relevant. Notwithstanding the foregoing, an Incentive Stock Option may only be granted to full or part-time employees (which term as used herein includes, without limitation, officers and directors who are also employees) and an Incentive Stock Option shall not be granted to an employee of an Affiliate unless such Affiliate is also a "subsidiary corporation" of the Company within the meaning of Section 424(f) of the Code or any successor provision. -5- Section 6. Awards. - ------------------ (a) Options. The Committee is hereby authorized to grant Options to Participants with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine: (i) Exercise Price. The purchase price per Share purchasable under an Option shall be determined by the Committee; provided, however, that such purchase price shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such Option. (ii) Option Term. The term of each Option shall be fixed by the Committee. (iii) Time and Method of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part and the method or methods by which, and the form or forms (including, without limitation, cash, Shares, promissory notes, other securities, other Awards or other property, or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price) in which, payment of the exercise price with respect thereto may be made or deemed to have been made. (iv) Restoration Options. The Committee may grant Restoration Options, separately or together with another Option, pursuant to which, subject to the terms and conditions established by the Committee and any applicable requirements of Rule 16b-3 or any other applicable law, the Participant would be granted a new Option when the payment of the exercise price of the option to which such Restoration Option relates is made by the delivery or withholding of Shares pursuant to the relevant provisions of the plan or agreement relating to such option, which new Option would be an Option to purchase the number of Shares not exceeding the sum of (A) the number of Shares so provided as consideration upon the exercise of the previously granted option to which such Restoration Option relates, (B) the number of Shares, if any, tendered or withheld as payment of the amount to be withheld under applicable tax laws in connection with the exercise of the option to which such Restoration Option relates, and (C) the number of previously owned Shares, if any, tendered as payment for additional tax obligations of the Participant in connection with the exercise of the option to which such Restoration Option relates pursuant to the relevant provisions of the plan or agreement relating to such option. Restoration Options may be granted with respect to options previously granted under the Plan or any other stock option plan of the Company, and may be granted in connection with any option granted under the Plan or any other stock option plan of the Company at the time of such grant; provided, however, that Restoration Options may not be granted with -6- respect to any option granted to a Non-Employee Director under the Company's 1983 Employee Stock Option Plan. (b) Stock Appreciation Rights. The Committee is hereby authorized to grant Stock Appreciation Rights to Participants subject to the terms of the Plan and any applicable Award Agreement. A Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive upon exercise thereof the excess of (i) the Fair Market Value of one Share on the date of exercise (or, if the Committee shall so determine, at any time during a specified period before or after the date of exercise) over (ii) the grant price of the Stock Appreciation Right as specified by the Committee, which price shall not be less than 100% of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right. Subject to the terms of the Plan and any applicable Award Agreement, the grant price, term, methods of exercise, dates of exercise, methods of settlement and any other terms and conditions of any Stock Appreciation Right shall be as determined by the Committee. The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate. (c) Restricted Stock and Restricted Stock Units. The Committee is hereby authorized to grant Awards of Restricted Stock and Restricted Stock Units to Participants with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine: (i) Restrictions. Shares of Restricted Stock and Restricted Stock Units shall be subject to such restrictions as the Committee may impose (including, without limitation, any limitation on the right to vote a Share of Restricted Stock or the right to receive any dividend or other right or property with respect thereto), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise as the Committee may deem appropriate. (ii) Stock Certificates. Any Restricted Stock granted under the Plan shall be evidenced by issuance of a stock certificate or certificates, which certificate or certificates shall be held by the Company. Such certificate or certificates shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock. In the case of Restricted Stock Units, no Shares shall be issued at the time such Awards are granted. (iii) Forfeiture; Delivery of Shares. Except as otherwise determined by the Committee, upon termination of employment (as determined under criteria established by the Committee) during the applicable restriction period, all Shares of Restricted Stock and all Restricted Stock Units at such time subject to restriction shall be forfeited and reacquired by the Company; provided, however, that the Committee may, when it finds that a waiver would be in the best interest of the -7- Company, waive in whole or in part any or all remaining restrictions with respect to Shares of Restricted Stock or Restricted Stock Units. Any Share representing Restricted Stock that is no longer subject to restrictions shall be delivered to the holder thereof promptly after the applicable restrictions lapse or are waived. Upon the lapse or waiver of restrictions and the restricted period relating to Restricted Stock Units evidencing the right to receive Shares, such Shares shall be issued and delivered to the holders of the Restricted Stock Units. (d) Performance Awards. The Committee is hereby authorized to grant Performance Awards to Participants subject to the terms of the Plan and any applicable Award Agreement. A Performance Award granted under the Plan (i) may be denominated or payable in cash, Shares (including, without limitation, Restricted Stock), other securities, other Awards or other property and (ii) shall confer on the holder thereof the right to receive payments, in whole or in part, upon the achievement of such performance goals during such performance periods as the Committee shall establish. Subject to the terms of the Plan and any applicable Award Agreement, the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award granted, the amount of any payment or transfer to be made pursuant to any Performance Award and any other terms and conditions of any Performance Award shall be determined by the Committee. (e) Other Stock-Based Awards. The Committee is hereby authorized to grant to Participants such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as are deemed by the Committee to be consistent with the purpose of the Plan; provided, however, that such grants must comply with Rule 16b-3 and applicable law. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the terms and conditions of such Awards. Shares or other securities delivered pursuant to a purchase right granted under this Section 6(f) shall be purchased for such consideration, which may be paid by such method or methods and in such form or forms (including without limitation, cash, Shares, promissory notes, other securities, other Awards or other property or any combination thereof), as the Committee shall determine, the value of which consideration, as established by the Committee, shall not be less than 100% of the Fair Market Value of such Shares or other securities as of the date such purchase right is granted. (f) General. (i) No Cash Consideration for Awards. Awards shall be granted for no cash consideration or for such minimal cash consideration as may be required by applicable law. -8- (ii) Awards May Be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for any other Award or any award granted under any plan of the Company or any Affiliate other than the Plan. Awards granted in addition to or in tandem with other Awards or in addition to or in tandem with awards granted under any such other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of such other Awards or awards. (iii) Forms of Payment under Awards. Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers to be made by the Company or an Affiliate upon the grant, exercise or payment of an Award may be made in such form or forms as the Committee shall determine (including, without limitation, cash, Shares, promissory notes, other securities, other Awards or other property or any combination thereof), and may be made in a single payment or transfer, in installments or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments. (iv) Term of Awards. The term of each Award shall be for such period as may be determined by the Committee. (v) Restrictions; Securities Exchange Listing. All certificates for Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions. If the Shares or other securities are traded on a securities exchange, the Company shall not be required to deliver any Shares or other securities covered by an Award unless and until such Shares or other securities have been admitted for trading on such securities exchange. Section 7. Amendment and Termination; Adjustments. - -------------------------------------------------- Except to the extent prohibited by applicable law and unless otherwise expressly provided in an Award Agreement or in the Plan: (a) Amendments to the Plan. The Board of Directors of the Company may amend, alter, suspend, discontinue or terminate the Plan; provided, however, that, -9- notwithstanding any other provision of the Plan or any Award Agreement, without the approval of the stockholders of the Company, no such amendment, alteration, suspension, discontinuation or termination shall be made that, absent such approval: (i) would cause Rule 16b-3 to become unavailable with respect to the Plan; (ii) would violate the rules or regulations of the New York Stock Exchange, any other securities exchange or the National Association of Securities Dealers, Inc. that are applicable to the Company; or (iii) would cause the Company to be unable, under the Code, to grant Incentive Stock Options under the Plan. (b) Amendments to Awards. The Committee may waive any conditions of or rights of the Company under any outstanding Award, prospectively or retroactively. The Committee may not amend, alter, suspend, discontinue or terminate any outstanding Award, prospectively or retroactively, without the consent of the Participant or holder or beneficiary thereof, except as otherwise herein provided. (c) Correction of Defects, Omissions and Inconsistencies. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry the Plan into effect. Section 8. Income Tax Withholding and Payment. - ---------------------------------------------- In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes, which are the sole and absolute responsibility of a Participant, are withheld or collected from such Participant. In order to assist a Participant in paying all or a portion of the federal and state taxes to be withheld or collected upon exercise or receipt of (or the lapse of restrictions relating to) an Award, the Committee, in its discretion and subject to such additional terms and conditions as it may adopt, may permit the Participant to satisfy such tax obligation by (i) electing to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes or (ii) delivering to the Company Shares other than Shares issuable upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes. In addition to the amounts required to be withheld to pay applicable taxes, subject to such terms and conditions as the Committee shall determine in its sole and absolute discretion, the Committee may permit the Participant to elect to -10- deliver to the Company Shares (other than Shares issuable upon exercise or receipt of (or the lapse of restrictions relating to) such Award) with a Fair Market Value equal to the amount of such additional federal and/or state income taxes imposed on the Participant in connection with the exercise of the Award. All elections, if any, must be made on or before the date that the amount of tax to be withheld is determined. Section 9. General Provisions. - ------------------------------ (a) No Rights to Awards. No Eligible Person, Participant or other Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Eligible Persons, Participants or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to any Participant or with respect to different Participants. (b) Award Agreements. No Participant will have rights under an Award granted to such Participant unless and until an Award Agreement shall have been duly executed on behalf of the Company. (c) No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. (d) No Right to Employment. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of the Company or any Affiliate, nor will it affect in any way the right of the Company or an Affiliate to terminate such employment at any time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement. (e) Governing Law. The validity, construction and effect of the Plan or any Award, and any rules and regulations relating to the Plan or any Award, shall be determined in accordance with the laws of the State of Minnesota. (f) Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Award, such provision shall be -11- stricken as to such jurisdiction or Award, and the remainder of the Plan or any such Award shall remain in full force and effect. (g) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate. (h) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash shall be paid in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated. (i) Headings. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. Section 10. Effective Date of the Plan. - --------------------------------------- The Plan shall be effective as of April 14, 1993, subject to approval by the stockholders of the Company within one year thereafter. Section 11. Term of the Plan. - ----------------------------- Unless the Plan shall have been discontinued or terminated as provided in Section 7(a), the Plan shall terminate on April 13, 2003. No Award shall be granted after the termination of the Plan. However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond the termination of the Plan, and the authority of the Committee provided for hereunder with respect to the Plan and any Awards, and the authority of the Board of Directors of the Company to amend the Plan, shall extend beyond the termination of the Plan. Amended 4/9/97 Amended 10/15/97 -12- EX-15 5 LETTERS FROM DELOITTE & TOUCHE LLP LETTER REGARDING UNAUDITED INFORMATION Stockholders and Board of Directors SUPERVALU INC. Eden Prairie, Minnesota We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited interim information of SUPERVALU INC. and subsidiaries for the periods ended November 29, 1997 and November 30, 1996, as indicated in our report dated December 17, 1997. Because we did not perform an audit on such information, we expressed no opinion on it in our report. We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended November 29, 1997, is incorporated by reference in the Registration Statements (No. 33-28310, No. 33- 16934, No. 2-56896, No. 33-50071, No. 333-10151, and No. 333-24813 on Form S-8 and No. 33-56415 on Form S-3). We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statements prepared or certified by an accountant within the meaning of Sections 7 and 11 of that act. /s/ Deloitte & Touche LLP December 17, 1997 INDEPENDENT ACCOUNTANTS' REVIEW REPORT Stockholders and Board of Directors SUPERVALU INC. Eden Prairie, Minnesota We have reviewed the accompanying consolidated balance sheets of SUPERVALU INC. (the Company) and subsidiaries as of November 29, 1997 and November 30, 1996 and the related consolidated statements of earnings and cash flows for the 12-week and 40-week periods then ended and the consolidated statement of stockholders' equity for the interim period ended November 29, 1997. These consolidated financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to such consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of SUPERVALU INC. and subsidiaries as of February 22, 1997 and the related consolidated statements of earnings, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated April 3, 1997 (except for the Investment in Shopko Note, as to which the date is April 25, 1997) we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of February 22, 1997 and the consolidated statement of stockholders' equity for the year then ended is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived. /s/ Deloitte & Touche LLP Minneapolis, Minnesota December 17, 1997 EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AS OF NOVEMBER 29, 1997 AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE 40 WEEKS ENDED NOVEMBER 29, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS FEB-28-1998 FEB-23-1997 NOV-29-1997 39,626 0 458,140 (14,589) 1,287,484 1,854,787 2,698,259 (1,103,851) 4,336,917 1,693,542 1,270,177 0 5,908 75,335 1,116,555 4,336,917 12,903,880 12,903,880 11,605,673 11,605,673 0 4,439 101,026 298,413 119,283 179,130 0 0 0 179,130 2.82 2.82
EX-99.1 7 CAUTIONARY STATEMENTS EXHIBIT (99.1) CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE SECURITIES LITIGATION REFORM ACT In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 ("Act"), SUPERVALU INC. (the "Company") is filing cautionary statements identifying important factors that could cause the Company's actual results to differ materially from those projected in forward- looking statements made by, or on behalf of the Company. When used in this Quarterly Report on Form 10-Q for the quarterly period (12 weeks) ended November 29, 1997 and in future filings by the Company with the Securities and Exchange Commission, in the Company's press releases, other communications, and in oral statements made by or with the approval of an authorized executive officer, the words or phrases "will likely result", "are expected to", "will continue", "is anticipated", "estimate", "project", "believe" or similar expressions are intended to identify forward-looking statements within the meaning of the Act. The following cautionary statements are for use as a reference to a readily available written document in connection with forward looking statements as defined in the Act. These factors are in addition to any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statement. WHOLESALE BUSINESS RISKS The Company's sales and earnings at wholesale are dependent on the Company's ability to retain existing customers and attract new customers, as well as its ability to control costs. While the Company believes that its efforts, including its new Activity Based Sell ("ABS") pricing, new market driving services, and regional logistics, will enable it to attain its goals, certain factors could adversely impact the Company's results, including: decline of sales to its independent retailer customer base due to competition and other factors; loss of corporate retail sales due to increased competition and other risks detailed more fully below; consolidations of retailers or competitors; increased self-distribution by chain retailers; increase in operating costs; the possibility that the Company will incur additional costs and expenses due to further rationalization or consolidation of distribution centers; entry of new or non-traditional distribution systems into the industry; possible delays or increased costs in implementing its initiatives; manufacturers do not change their pricing, transportation, and/or promotional programs in cooperation with the Company's new pricing methods; and possible loss of retailer customers who are not compatible with such changes. In addition, timing of certain efforts could be impacted by the information technology related expenses associated with addressing year 2000 issues. RISKS OF EXPANSION AND ACQUISITIONS The Company intends to continue to grow its retail and wholesale segments in part through acquisitions. Expansion is subject to a number of risks, including the adequacy of the Company's capital resources; the location of suitable store or distribution center sites and the negotiation of acceptable lease terms; ability to hire, train and integrate employees; and possible costs and other risks of integrating or adapting operational systems. In addition, acquisitions involve a number of special risks, including: making acquisitions at acceptable rates of return; the diversion of management's attention to assimilation of the operations and 1 personnel of the acquired business; potential adverse short-term effects on the Company's operating results; and amortization of acquired intangible assets. RETAIL BUSINESS RISKS The Company's retail segment faces risks which may prevent the Company from maintaining or increasing retail sales and earnings including: competition from other retail chains, supercenters, non-traditional competitors, and emerging alternative formats; operating risks of certain strategically important retail operations; and adverse impact from the entry of other retail chains, supercenters and non-traditional or emerging competitors into markets where the Company has a retail concentration. LIQUIDITY Management expects that the Company will continue to replenish operating assets and reduce aggregate debt with internally generated funds and capital leases unless additional funds are necessary to complete acquisitions. If capital spending significantly exceeds anticipated capital needs, additional funding could be required from other sources. In addition, acquisitions could affect the Company's borrowing costs and future financial flexibility. LITIGATION While the Company believes that it is currently not subject to any material litigation, the costs and other effects of legal and administrative cases and proceedings and settlements are impossible to predict with certainty. The current environment for litigation involving food wholesalers may increase the risk of litigation being commenced against the Company. The Company would incur the costs of defending any such litigation whether or not any claim had merit. The foregoing should not be construed as exhaustive and the Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. 2 -----END PRIVACY-ENHANCED MESSAGE-----